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JAMES, O'BRIEN OUTLINE SIA PLAN TO INCORPORATE SAVING, INVESTMENT INCENTIVES IN LONG-TERM ECONOMIC GROWTH EFFORT

 JAMES, O'BRIEN OUTLINE SIA PLAN TO INCORPORATE SAVING,
 INVESTMENT INCENTIVES IN LONG-TERM ECONOMIC GROWTH EFFORT
 WASHINGTON, March 4 /PRNewswire/ -- Warning against the "extremely seductive" nature of quick fix solutions to the nation's economy in an election year, Securities Industry Association (SIA) officials today emphasized a long-term perspective is necessary, and offered an outline of a plan to accomplish that goal.
 The plan, outlined by Thomas A. James, SIA chairman, and Edward I. O'Brien, president, at a National Press Club "Morning Newsmakers" program, urges the federal budget deficit be reduced $50 billion a year, federal entitlement spending be reined in, individual retirement accounts (I.R.A.s) be fully restored for all Americans, and capital gains taxes be reduced, among other items.
 SIA's proposal also suggests for revenue offsets including the use of the peace dividend, an increase in tax rates for those in the $200,000-plus income group and an energy tax, among other options.
 Quick-Fix Solutions Could Exacerbate Problem, O'Brien Warns
 "Quick stimulative fixes, extremely seductive in an election year, run the risk of exacerbating long-term economic problems which are largely to blame for the predicament we are in now," O'Brien said.
 Moreover, he warned, it is critical that in seeking to resolve long- term economic problems certain solutions aren't "shelved simply because they do little to stimulate the economy in the short term."
 One of the major problems affecting the nation's economy is the "infamously low savings rate in the U.S. with all its resultant negatives -- low investment, low innovation (and) low productivity," O'Brien said.
 Deficit Reduction Must be Primary Goal of Fiscal Policy
 Discussing SIA's plan, James, said "to stimulate long-term economic growth and assure price stability, we believe deficit reduction must be the primary goal of fiscal policy."
 Large and protracted deficits have been dampening economic growth and diverting funds from the private sector, he said.
 In addition, he said, SIA believes lowering the capital gains tax rate -- preferably to a 15 percent rate with a one-year holding period -- will promote capital formation and raise revenue.
 "Lower capital gains taxes will benefit all Americans by encouraging technological advance and job creation," he explained.
 He also said re-introduction of full deductibility of I.R.A.s "for all Americans and a broadening of private pension plans will encourage Americans to save for themselves for the future as a supplement to or surrogate for Social Security."
 "Longer life expectancies and escalating medical costs make this an urgent priority," he emphasized.
 Lastly, he said, "a temporary tax credit or allowance, and/or a permanent research and development tax credit will incentivize capital investment, raise productivity and enhance our international competitiveness."
 James said, "Consistent with a goal to stimulate capital formation, increase national savings and reduce the federal deficit, SIA recognizes that some of our policy recommendations are accompanied by potential costs. We believe that it is our responsibility to identify possible ways to pay for these recommendations."
 Tax Increase for Highest Income Group Suggested
 He said SIA recommends a 1-percentage point to 2-percentage point increase in tax rates on the highest income class which "would raise $21 billion to $42 billion in revenue over five years" to fund the losses in tax revenues that might arise from SIA's recommendations.
 "Such a revenue increase would more than offset the five-year $26 billion costs of the super-I.R.A. proposal" introduced last year.
 "The 1986 decision to limit availability of the tax deductible I.R.A. was ill-advised," he said, noting I.R.A.s "prompted new savings from individuals in most income groups and that those funds were invested through all kinds of financial service organizations."
 Turning to capital gains, James said although "the revenue debate still rages," SIA believes "lower tax rates could and would pay for themselves," based upon previous experience.
 He also brushed aside as "nonsense" arguments that lower capital gains tax rates benefit only the rich, pointing to the millions of direct and indirect shareholders in the nation.
 "Certainly, those who have capital gains benefit directly from a lower tax rate and since, by definition the wealthy have the capital, most of the direct tax savings inure to their benefit," he said.
 "However, all Americans benefit from a more productive economy. Less expensive and more available capital makes us more competitive with foreign industry and stimulates the growth to U.S. private enterprise," James said.
 Peace Dividend, Energy Tax Seen as Revenue Sources
 SIA's plan also urges a $50 billion-a-year cut in the federal budget deficit. The national debt is approaching a staggering $4 trillion in fiscal year 1992, James said.
 In addition to reducing the debt through the use of the peace dividend, he said SIA suggests an energy tax, which also would be consistent with international tax policies and would address conservation and environmental concerns.
 He said a consumption tax might at some time become "an acceptable solution to generate tax revenues while discouraging consumption and increasing savings." Currently "it appears an energy tax is likely to be more acceptable to a larger segment of Americans."
 Other steps which must be taken include containing mandatory entitlements.
 "Decisions in this sensitive area can be painful and difficult to make. But, the simple fact is that there isn't enough money to give everyone everything they want or think they should have," James said.
 The rate of growth in this area "can't be sustained without jeopardizing future living standards of the entire population," he said.
 Urge Examination of Methodology Use for Mandatory Spending
 To help rein-in these expenditures, SIA recommends an examination of the methodology employed for automatic annual increases in mandatory entitlements. Serious consideration should be given to either indexing at a rate below the inflation rate or exploring whether a means-testing requirement is appropriate for some programs, James said.
 The broad SIA plan began taking shape last year, O'Brien said, and included participation by SIA staff, the association's tax policy committee and SIA's 32-person board of directors representing a cross section of firms from across the nation.
 Discussions about the plan "have been ongoing and continuous -- right up to our board meeting yesterday," he said.
 James is the 1992 SIA chairman and chairman of Raymond James Financial, Inc., St. Petersburg, Fla.
 SIA is the securities industry's trade association, representing the business interests of more than 600 securities brokerage and investment banking firms in the United States and Canada. Collectively, they account for more than 90 percent of securities activity in North America.
 -0- 3/4/92
 /CONTACT: Art Samansky or Karen San Antonio of Securities Industry Association, 202-296-9410/ CO: Securities Industry Association ST: District of Columbia IN: FIN SU:


CK-OS -- NY032 -- 4891 03/04/92 11:01 EST
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Date:Mar 4, 1992
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