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BTU ENERGY TAX WILL HARM THE ECONOMY, UNDERMINE CLINTON'S PROGRAM; NAM TELLS CONGRESS A VAT TAX WOULD BE SMARTER, FAIRER

 WASHINGTON, Feb. 24 /PRNewswire/ -- "The administration's proposed BTU energy tax would slow economic growth, push prices up, retard business investment and cost the country over 600,000 jobs. It should be replaced with a broad-based consumption tax such as the VAT," National Association of Manufacturers President Jerry Jasinowski told Congress today.
 "By all major economic criteria, a broad-based consumption tax appears to be a superior way to gain revenue and maintain growth," he testified before the Senate Committee on Energy and Natural Resources.
 "Although the BTU tax appears to be a well-intentioned attempt to tax consumption, in reality a third of it would fall on industrial production. Because manufacturing is more energy intensive, the loss in industrial production would be 30 percent higher than the loss in GDP," he said.
 "Industries that would be particularly adversely affected include primary metals, aluminum, chemicals, paper, cement, fertilizers, transportation and the energy sector itself."
 Jasinowski warned that the BTU tax also would harm the competitiveness of U.S.-produced goods in foreign markets, significantly reducing exports which have accounted for 30-40 percent of U.S. economic growth.
 "The problem with this tax, from an economic growth point of view, is that it entails a simultaneous shock to both prices and production costs. Real GDP falls below trend as the tax is phased in and, by the final year, output has been reduced by $38 billion. The largest losses come in personal consumption expenditures ($27 billion) and business fixed investment ($18 billion).
 "Ironically, the increase in prices caused federal spending to increase, due to indexation, and thus has perverse effects on the fiscal deficit. Plus, lower collections of other tax revenues means that the deficit is only improved by half.
 "I would urge the Congress to drop the administration proposal for a BTU-based energy tax, primarily because of its anti-competitive international effects and the disproportionate impact it would have on manufacturing industries and certain regions of the country -- namely the South and the West.
 "We urge Congress to reduce the federal budget deficit to the maximum extent possible by comprehensive, enforceable restraints on federal spending. To the extent tax increases are required for deficit reduction purposes, we believe that a broad-based general tax on consumption, such as a VAT, will do the least amount of harm to the economy, will avoid damage to our international competitiveness and, if properly adjusted so as to offset its regressivity, will be the most uniformly fair across all social, regional and economic sectors," Jasinowski concluded.
 -0- 2/24/93
 /CONTACT: Laura Brown, 202-637-3087, or Paul Huard, 202-637-3075, both of the National Association of Manufacturers/


CO: National Association of Manufacturers ST: District of Columbia IN: OIL SU: ECO EXE

DS -- DC002 -- 9764 02/24/93 09:09 EST
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Date:Feb 24, 1993
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