A caption in yesterday's Business section misidentified the corporate affiliation of John Bryan Jr., chairman of Sara Lee Corp.
Six corporate chieftains gulped hard yesterday and told a congressional committee they'd rather swallow President Reagan's tax plan whole than see no change in the tax laws.
The executives, asked to testify before the House Ways and Means Committee because they are generally in favor of tax overhaul, did have some complaints about particular elements of the new Reagan plan, such as taxation of "windfall" gains and of some fringe benefits. But they remained positive about lower rates and fewer loopholes and told the committee they could live with the unpleasant parts of the plan if they got the portions they liked, including deductions for part of dividends paid and lower corporate rates.
"We are now, unfortunately, at the point where tax considerations not only outweigh but may even override economic considerations in business decisions," said John M. Richman, chairman of Dart & Kraft Inc. "Every time a businessman makes a tax-motivated decision instead of a market-motivated one, every time he pays for tax advice instead of research and development, the economy is weakened just a little bit more."
Said Lewis W. Lehr, chairman of 3M Corp.: "We envision the package will produce more economic expansion, more research and development, more jobs and more revenue for the government."
Meanwhile, Senate Finance Committee Chairman Robert Packwood (R-Ore.) said he would like to see the top individual tax rate in the plan reduced to 25 percent instead of the 35 percent proposed by Reagan. A Packwood spokesman said, however, that the senator does not have a specific plan to replace the revenue that would be lost by a lower rate.
Packwood was one of several GOP congressional leaders who met with Reagan yesterday and predicted that a tax overhaul, albeit somewhat amended, could emerge from Congress this year. The corporate executives also visited the president after the committee hearing. Reagan told them that his tax proposal "isn't perfect. . . . But we believe that it'll work," and asked for their support in fighting off "an army of lobbyists" pushing to keep their tax preferences in the code.
At the hearing, the second in a long series planned on the Reagan plan, committee Chairman Dan Rostenkowski (D-Ill.) indicated for the first time that he wants to exempt from the new act investments contracted for before the effective date of the law. If he gets his way, many more investments would be covered by the current depreciation system and other tax law benefits.
The committee would then be short of revenue even before it began writing a bill. The Reagan plan is roughly "revenue-neutral," but would lose money if the contract provisions were changed. Rostenkowski conceded, "It makes it difficult to find the revenues we'd lose."
House Majority Leader James Wright (D-Tex.) yesterday also criticized the proposal for losing $12 billion over five years, saying, "That should be corrected." Wright also expressed opposition to the plan's proposed limited taxation of employer-paid health insurance premiums and elimination of the deduction for state and local income taxes. Tax revision "is probably a good thing to do," however, if it helps the middle class and doesn't raise the deficit, Wright said.
None of the business leaders demurred when asked by ranking committee Republican John J. Duncan of Tennessee if the Reagan plan, warts and all, was preferable to the current system. But John H. Bryan Jr., chairman of the Sara Lee Corp. and the Grocery Manufacturers Association, said he would have to "swallow hard," and William R. Howell, chairman of J. C. Penney Co. Inc., said he would worry about the impact of some provisions.
Several executives didn't like taxation of the first $10 per month of health insurance premiums for a single taxpayer and the first $25 for a married couple. That proposal would affect labor-intensive firms in two ways: Employes themselves would have to declare the affected amount of premiums as income for federal income tax and Social Security taxation purposes, and employers would have to pay their share of Social Security payroll tax on the money if the employe is below the Social Security cutoff point, which is $39,600 this year.
John G. Smale, president of Procter & Gamble Inc., said he was concerned about a provision to "recapture" $57 billion in taxes previously deferred through depreciation and about the fact that the corporate rate reduction from 46 percent to 33 percent was scheduled to take place six months after the deductions were repealed. A new provision permitting corporations to deduct 10 percent of the cost of dividends, strongly supported by all the witnesses, would not take effect until six months after that.