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Afraid of the dark.

For Business, It's Not What Clinton Has Said About the Economy, It's What He Hasn't Said

IF THERE IS FEAR IN THE Arkansas business community over President Clinton's economic plan, it is fear of the unknown.

From the top of corporate ladders to downtown storefronts, most business people just have not seen enough specifics from Clinton to know if their concerns will be damaged or enabled.

There are, however, a few opinions floating around.

"I think the stimulus that he's promoting for small businesses is a good idea," says Joe D. Ratliff, managing partner of Baird Kurtz & Dobson, the largest accounting firm in the state. "But I think it needs to be a little more intense."

Clinton's package is a mixed bag of tricks, including a $325 billion combination of tax increases and spending cuts for deficit reduction, $160 million in business tax and public works incentives and a $30 billion boost for infrastructure projects.

"I think some of the things Clinton is promoting is a return to a system that will allow small businesses to expand and buy new equipment," Ratliff says.

He is very pleased with Clinton's business incentive plan.

The president has called for a permanent investment tax credit for companies with annual sales under $5 million and a 50 percent capital gains tax exclusion for small business investors who hold their stock for at least five years. Total cost: $29.5 billion through 1998.

He also is fond of the proposal to create 50 federal enterprise zones, enabling companies located in special low-income, high-unemployment areas to receive tax credits for creating jobs. The program would cost $4.1 billion over the next five years.

Ratliff worries, however, that health care costs will overshadow any benefits from the new plan.

Company employees currently enjoy the benefit of having their health insurance premiums deducted before taxes, but the self-employed do not have that luxury.

It could get worse.

When Hillary Clinton announces in May her panel's recommendations for overhauling the nation's health care system, she might recommend that health insurance payments be taxed, in full or in part.

More Cuts, Please

The worries of Republicans on Capitol Hill are echoed by Lee Bodenhamer, president of the Little Rock investment firm Meridian Management Co.

"I have some concerns that the end result is going to be tax increases with no spending cuts," says Bodenhamer, expressing little hope for Clinton's plan.

"A tax increase tends to slow the economy down," he adds.

For individuals who earn more than $115,000 a year in taxable income, or couples who earn more than $140,000 annually, the basic tax rate would rise from 31 percent to 36 percent under Clinton's plan. If you make more than $250,000 annually, you can add another 39.6 percent for every dollar over that level.

In a sense, Clinton is asking the wealthiest 1.2 percent of Americans to pick up the tab for about 60 percent of the new revenue stream, while the bottom half of wage earners will have virtually no increases.

Corporate tax rates also would rise from 34 percent to 36 percent for taxable income above $10 million. In short, it's a total reversal from Reaganomics.

"Clinton's plan takes income away from higher-income people and corporations, which are the two groups that do most of the savings," Bodenhamer says.

He believes Clinton missed one of his best chances to attack the budget deficit when political reality nixed his idea to freeze cost-of-living adjustments for Social Security recipients.

Clinton also is pushing a tax on all energy sources based on heat content. The fuel tax is expected to raise $71.4 billion over five years, and it is rumored the tax would be phased in over three years.

But no one knows exactly what kinds of consumption will be excluded from the tax. As it stands, the tax would appear to hurt industries such as timber and aluminum because of their high reliance on energy for production.

There have been hints, however, that the tax would not apply to certain industrial uses.

Spokesmen for International Paper Co. and Weyerhaeuser Co., two timber giants in Arkansas, are staying mum on the tax until they see the particulars.

Natural gas interest Arkla Inc. does not believe the fuel tax will make much of a difference in the utility's operations.

Milt Honea, Arkla chairman and chief executive officer, says it could lead to a rate increase, but it would be met with a corresponding reduction in usage due to conservation-minded consumers.

The National Taxpayers Union estimates the tax would result in annual energy bill increases of $157-$212 per household by 1997.

Critical Interest Rates

The central Arkansas real estate industry seems upbeat about the direction Clinton is taking.

Commercial Realtor Dwight Blissard smiles at the way the bond market is rallying behind Clinton, and the Federal Reserve Board appears willing to keep interest rates low.

"In our industry, lower interest rates translate into less debt service and more business activity," Blissard says. But he thinks Clinton should drop his stimulus package because the economy has shown mild signs of recovery.

Curt Bradbury, chairman, president and chief executive officer of Worthen Banking Corp., fears that only half the package will be enacted.

"What we don't know is whether a profligate Congress is going to pass the spending cuts," Bradbury says. "My suspicion is they won't do what they should. If there are no spending cuts, the tax part is horrible."

Bradbury also has deep objections to the philosophy behind the energy tax.

If Clinton supports the energy tax, Bradbury says, he should also back a general value-added tax, which taxes the value added to a product at each state in its manufacturing cycle in addition to the ultimate consumer purchase.

A national sales tax is what Bradbury wants. He would use the proceeds to offset the deficit.

Clinton, in fact, briefly mentioned the concept of a national sales tax last week. Then he changed the subject.

Clearly, the economic package is still a work in progress.


(Continued From Page 1)

Used to be, when a businessman found himself in trouble, he'd defiantly tell his accusers, "Call my lawyer."

These days, the proper response would be, "Call my lawyers."

One just won't do anymore.

Criminal problems often are followed by bankruptcy. Divorce suits may not be far behind.

A fantasy list of Arkansas lawyers might include Perroni for a criminal defense case, David Grace of the Little Rock firm Hardin & Grace for bankruptcy and Philip Dixon of the Little Rock firm Dover & Dixon for divorce.

There are others, of course. William Wilson Jr. of the Little Rock firm Wilson Engstrom Corum & Dudley would be on many short lists.

In fact, according to a recent survey of Arkansas lawyers by Woodward/White Inc. of Aiken, S.C., Wilson was considered one of the state's best in business litigation, criminal defense, family law, first amendment law and personal injury litigation.

Jack Lassiter of Wilson & Associates in Little Rock represents Scharmel Bolling Burnett in that made-for-television murder case involving Scharmel's late husband, Johnny Burnett.

These are not lawyers one keeps on retainer. Hourly fees can range from $75 to as much as $250, according to a recent survey of Arkansas law firms.

These are the troubleshooters a client's regular legal counsel might recommend for a particularly intricate case.

Again, take the president and owner of The Perroni Firm in Little Rock.

Perroni thinks he has gained such high-profile clientele in part because people around the state knew his name from his five years in the U.S. Attorney's office.

He says his experience as a former criminal prosecutor helps him in preparing his defense.

"I have an edge there," says Perroni, who also clerked under William Wilson.

Perroni established himself in the minds of influential attorneys, many of whom are now judges, before he ever graduated from law school.

"He was just an extremely hard worker," Judge Henry Woods says. Perroni used to clerk for Woods, but now he appears before him in the courtroom.

"What makes him so good is he's always exceptionally well-prepared," Woods says.

Even some of Perroni's detractors say he is meticulous. Where other attorneys paint with a broad brush, Perroni is more likely to try pointillism.

Perroni is smooth and personable, both in and out of the courtroom, although his 6-foot-7 frame can present a problem.

"The jury could think that I'm being a bully if I'm not careful," he says.

He sometimes intentionally stands away from people during a case.

Other attorneys say Perroni may not be a bully but can take cheap shots and make issues out of irrelevant facts. Some also say Perroni has an unreasonable side that can make him difficult to get along with.

Still, one lawyer says tenaciousness makes Perroni a success in the courtroom.

Former U.S. Attorney W.H. "Sonny" Dillahunty did not have clerks in his office until Perroni came along.

Three months from taking the bar exam, Perroni asked if he could work in Dillahunty's office for free.

He got the job. And he got paid.

"I thought he was an aggressive young man, a little bit on the tall, lanky side," Dillahunty says. "But I could see that he had promise.

"... I guess one of his weaknesses now is that he wants to make money. One sometimes gets carried away with the desire to make a buck."

On the flip side, Perroni has become known for his charity work. He helped to establish the Ronald McDonald House at Arkansas Children's Hospital in Little Rock. He also helped found the Harrison House in Little Rock as a temporary residence for relatives of transplant recipients.

Perroni has joked about going into fund raising professionally.

But he's too busy trying to help certain Arkansans keep their records clean.

Out of close to 100 cases as a prosecutor, Perroni says he lost only about a half dozen.

Typically, he has not been as successful on the other side of the table, although he has had his moments.

"One of my clients who didn't fair too well ... made the comment that the pupil had whipped his professor," says Jack Holt Jr., chief justice of the Arkansas Supreme Court, a former professor of Perroni's who is now an associate.

Perroni ran for state representative in 1986, losing by 400 votes to Ron Fuller.

"I didn't lose by enough," Perroni says, hinting that full-time politics could be in his future.

Perroni also handles personal injury cases, but it's the criminal defense he seems to relish.

He says, "There's drama, and I like that."
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Title Annotation:evaluation of President Bill Clinton's economic policy
Author:Haman, John
Publication:Arkansas Business
Date:Mar 1, 1993
Previous Article:Lining up a legal dream team.
Next Article:Maneuvering with grace: low-profile attorney adeptly handles high-profile bankruptcy cases.

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