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Show mm . . J CONGRESS TO TAKE NEW LOOK AT "ENTERPRISE ZONES" Massive federal programs designed to invigorate the economies of the decaying cores of American cities have fallen far short of that goal. Perhaps that is why strong bipartisan support seems to be building in favor of a new concept that would start small business growth and create jobs in urban downtown settings. This would be accomplished for the most part through tax breaks. While these would be chiefly at the federal level, special tax treatment at state and local levels would be encouraged as well. BRITISH EXPERIENCE The urban jobs and enterprise zone measure has been filed in the U.S. House of Representatives by noted tax cutter, Rep. Jack Kemp (R-N.Y.) and liberal-leaning Rep. Robert Garcia (D-N.Y.). (D-N.Y.). It is a careful redraft of legislation filed by Kemp in the last Congress. Rationale for the measure is a plan which was started two years ago by leaders of British Prime Minister Margaret Thatcher's Conservative Party. The plan is based on the premise that government itself is a leading, if not a chief, contributor to city ills. The British experiment offers tax incentives to new small businesses and to employes of these enterprises. It is intended as the conservative answer to socialism and over-regulation by government. So, its top priority is the promotion of private initiative for individuals in-dividuals and businesses. So far, 11 enterprise zones have been established in Britain, and it is expected that all of them will be in full operation before this summer ends. It will, however, be several months before a fair measure of their progress can be made. HOW IT WOULD WORK The Kemp-Garcia bill, with a companion com-panion measure introduced in the Senate by Sens. Rudy Boschwitz (R-Minn.) (R-Minn.) and John Chafee (R-R.I ), aims to offer tangible opportunity to the urban poor and to small business en-'deavors en-'deavors in the inner city. It is more flexible than the original Kemp bill, has better tax incentives, gives more attention at-tention to local and state government participation. Actually, local governments will designate the enterprise zones ever, though their choices will be subject to federal government approval. Within these zones, Uncle Sam will extend major tax incentives for job establishment establish-ment and the creation and expansion of small business. For participating businesses, these federal tax incentives would eliminate capital gains tax liability within the approves zones, exempt from taxation half of all income earned by zone enterprises, en-terprises, and also exempt interest income earned on loans to these enterprises. en-terprises. The loss carry forward would be extended to 20 years to permit zone undertakings to write off initial losses against long-term gains as a means of encouraging entrepreneurial progress. Finally a 5 percent refundable business income tax credit equal to 5 percent of the wages paid CETA-eligible CETA-eligible zone employes would be made available as an offset to the adverse impact of the Social Security payroll tax. Individuals who are poor but able to seek and retain tax-paying enployment in enterprise zones would get a refundable 5 percent personal income tax credit for pay earned by zone workers--up to $1,500. WHAT LIES AHEAD? While the Kemp-Garcia bill is finding favor in both House and Senate, passage this year is not expected. And favorable action in 1982 could come only after an uphill fight. Labor leaders are adamantly opposed even though the measure no longer contains earlier provisions for reduced Social Security taxes and a sum-minimum wage for unskilled youth. Granted, the measure has been endorsed en-dorsed by Administration officials and many leading civic and business organizations. Together, these may ultimately provide enough support to ensure passage if the White House really gets behind the bill. |