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Hearings on enterprise zones.

HEARINGS ON ENTERPRISE ZONES

The House Ways and Means Committee held public hearings on the Bush administration's enterprise zone proposal and the Enterprise Zone Improvements Act of 1989 (HR 6), introduced by Congressman Charles B. Rangel (D-N.Y.).

Rangel has described enterprise zones as a way "to stimulate the creation of new jobs, particularly for disadvantaged workers and long-term unemployed individuals," by encouraging private businesses to invest in inner-city communities across this country.

Kenneth Gideon, assistant secretary for tax policy of the Treasury Department, told the committee the administration supports the creation of enterprise zones because "the economic problems faced by these urban and rural areas require specifically targeted incentives."

However Congressman Donald Pease (D-Ohio) expressed concern that enterprise zones would allow wealthy individuals to shelter income in limited partnerships designed to take advantage of the tax credits.

Competing proposals. The administration's proposal would provide a 5% refundable tax credit for the first $10,500 earned by individuals working in a zone and having total wages below $20,000. It would also eliminate capital gains taxes realized during zone designation periods on qualified assets.

The more far-reaching bill introduced by Congressman Rangel includes provisions providing a 10% tax credit for employers for wages up to 2.5 times the Federal Unemployment Tax Act (FUTA) wage base for all enterprise zone employees. Individual employees would receive a tax credit of 5% of 1.5 times the FUTA wage base. It also provides for a 10% investment credit for certain business-related property and an annual deduction of up to $100,000 for the purchase of newly issued stock in a small enterprise zone business.

Gideon claimed the Rangel bill would cost the federal government more than 3.5 times the estimated $1.8 billion cost of the administration's proposal, adding that "the appropriate incentives must be carefully structured to achieve economic recovery within affordable budget" limits.
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Publication:Journal of Accountancy
Date:Dec 1, 1989
Words:314
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