CONTENTS ADMINISTRATION WITNESSES 3 Lance, Hon. Bert, Director, Office of Management and Budget___ Sunley, Emil, Deputy Assistant Secretary of the Treasury for Tax Policy-.- Woodworth, Hon. Laurence, Assistant Secretary of the Treasury for Tax American Bankers Association, Lief H. Olsen, chairman, economics ad- American Council for Capital Formation, Dr. Charls E. Walker, former Deputy Secretary of the Treasury and chairman, accompanied by Krasnow, Herbert, president, National Association of Small Business In- vestment Companies, accompanied by Walter B. Stults, executive vice National Association of Home Builders, Michae Sumichrast, vice president and chief economist, accompanied by Gordon Smith, Miller & Smith__-.- National Association of Small Business Investment Companies, Herbert Krasnow, president, accompanied by Walter B. Stults, executive vice National Federation of Independent Business, Bruce G. Fielding, O'Brien, Edward I., president, Securities Industry Association, accom- panied by Stephen Small, assistant vice president and legislative Pendergast, Edward H., CPA, representing the Smaller Business Associa- Reese, Thomas, legislative director, Taxation With Representation_. Securities Industry Association, Edward I. O'Brien, president, accom- Smaller Business Association of New England, represented by Edward H. PUBLIC WITNESSES-Continued Smith, Dan Throop, senior research fellow, Hoover Institution on War, Sumichrast, Michael, vice president and chief economist, National Associa- tion of Home Builders, accompanied by Gordon Smith, Miller & Smith, Page 215 Thygerson, Dr. Kenneth J., chief economist and director of the Economics 142 Treptow, Dean, chairman of legislative affairs, Independent Business Asso- 35 Walker, Dr. Charls E., former Deputy Secretary of the Treasury and chair- American Bankers Association, Gerald M. Lowrie____. American Bar Association, Don V. Harris, chairman, section of taxation__ American Federation of Labor and Congress of Industrial Organizations__ American Institute of Certified Public Accountants, William C. Penick, Chamber of Commerce of the United States, Robert R. Statham, director, 81 451 413 Financial Executives Research Foundation, Norman B. Ture, president, Norman B. Ture, Inc.-B. Kenneth Sanden, partner, Price Waterhouse General Telephone & Electronics Corp- 392 Harris, Don V., chairman, section of taxation, American Bar Association__ 461 440 Media General, Inc., Alan S. Donnahoe, president and chief executive 441 National Dividend Foundation, Inc., John H. Perry, Jr., president__. Penick, William C., chairman, division of Federal taxation, American In- Ture, Norman B., president, Norman B. Ture, Inc., and B. Kenneth Sanden, Appendix A.-Communications Received by the Committee on Finance 393 INCENTIVES FOR ECONOMIC GROWTH MONDAY, MAY 16, 1977 U.S. SENATE, SUBCOMMITTEE ON TAXATION AND DEBT MANAGEMENT Washington, D.C. The subcommittee met, pursuant to notice, at 9:30 a.m. in room 2221, Dirksen Senate Office Building, Hon. Harry F. Byrd, Jr. (chairman of the subcommittee) presiding. Present: Senators Long, Harry F. Byrd, Jr., of Virginia, Hansen, and Packwood. Senator BYRD. Nine-thirty having arrived, the committee will come to order. Before the witnesses begin their testimony, I would like to take this opportunity to welcome each of the witnesses to this first day of hearings before the Subcommittee on Taxation and Debt Management Generally. The hearing today is the first in a series of 4 days of testimony on the topic of incentives for economic growth. [The press release announcing these hearings follows:] [Press release, May 6, 1977] SUBCOMMITTEE ON TAXATION AND DEBT MANAGEMENT ANNOUNCES HEARINGS ON INCENTIVES FOR ECONOMIC GROWTH Subcommittee Chairman Harry F. Byrd, Jr. (I., Va.), announced today that the Subcommittee on Taxation and Debt Management will hold hearings on May 16 and 17, 1977, and June 131 and 14, 1977, on the relationship between taxation and economic growth. The hearings will begin at 9:30 A.M. in Room 2221, Dirksen Senate Office Building. Senator Byrd stated that the hearings will examine the effect of tax policy upon the growth of the private sector of our economy. Witnesses before the Subcommittee are to focus upon those proposals which they consider as the key to providing for greater business growth and higher employment. Senator Byrd, in announcing the hearings, noted that capital formation proposals were put forth in general terms by the last Administration and were discussed in connection with the Tax Reform Act of 1976. Hearings on this general subject were held early in 1976 before the Subcommittee on Financial Markets of the Committee on Finance. Since then, he said, the Administration has indicated a strong interest in acting on the problem. The Treasury Department plans to submit recommendations in the fall. Senator Byrd stated that Congdess, and the Subcommittee in particular, must become more involved in this subject if Congress is to have a significant role in the formulation of policy in this area. "We need to explore the range of current proposals, focus on those which merit serious consideration, see how they would work, and analyze the ramifications— who's going to be hurt and who's going to be helped." 1 Date subsequently changed to June 15, 1977. (1) In announcing the hearings, Senator Byrd expressed a desire that witnesses concentrate on what they consider to be the two or three most important proposals to encourage economic growth and employment. "One thing to be avoided is for business to present the Subcommittee with a shopping list of proposals." Senator Byrd said that he wants to give special attention to the views of the small business community. "The impact of the current proposals on small businesses, incorporated and unincorporated, should be carefully considered." We ought to immerse ourselves in the specifics of these proposals now, so that the Congress and the Administration will have ample opportunity to study the views presented." The hearings will begin with presentations by Daniel Brill, Assistant Secretary of the Treasury for Economic Policy, and Alan Greenspan, former Chairman of the Council of Economic Advisers, in order to set the stage. The Subcommittee will then hear from spokesmen representing small business and business generally. In the second two days of hearings, the Subcommittee will receive testimony from present Administration officials and leading economists, academicians and "public interest" groups. The following witnesses have been scheduled to testify on the first two days (May 16 and 17): Daniel Brill, Assistant Secretary of the Treasury for Economic Policy; Alan Greenspan, former Chairman, Council of Economic Advisers; Council of Small and Independent Business Organizations; Small Business Legislative Council; National Association of Small Business Investment Companies; American Council for Capital Formation; Securities Industry Association; American Bankers Association; and National Savings and Loan League and U.S. League of Savings Associations. An announcement concerning witnesses for the second two days of hearings will be made in the next few weeks. Legislative Reorganization Act.-The Legislative Reorganization Act of 1946, as amended, requires all witnesses appearing before the Committees of Congress "to file in advance written statements of their proposed testimony, and to limit their oral presentations to brief summaries of their argument." Witnesses scheduled to testify must comply with the following rules: (1) A copy of the statement must be filed by the close of business two days before the day the witness is scheduled to testify. (2) All witnesses must include with their written statement a summary of the principal points included in their statement. (3) The written statements must be typed on letter size paper (not legal size) and at least 75 copies must be submitted by the close of business the day before the witness is scheduled to testify. (4) The witnesses will be allowed 15 minutes for their oral presentation. Written Testimony.-Other persons interested in presenting their views to the Subcommittee are urged to prepare a written statement for submission and inclusion in the printed record of the hearings. These written statements should be submitted to Michael Stern, Staff Director, Committee on Finance, Room 2227, Dirksen Senate Office Building, on or before July 1, 1977. Senator BYRD. During the past several years, the American economy has been confronted with the unfortunate phenomena of high levels of inflation and high levels of unemployment. There is now a growing concern that American businesses are not making the necessary investments in plant and equipment to sustain the future growth of the American economy and to provide jobs for American workers. This view is backed by statistics which show that, from 1966 to 1976, approximately 19 million workers entered the labor force. Yet during the same period the growth rate in the amount of private plant and equipment has declined. Many proposals are now being advanced as solutions for the low rate of growth in the American economy. These proposals involve changes in our present tax laws relating to businesses. Some of these proposals, if they were adopted, would involve a comprehensive change in our current system. |