Extensions of Remarks 11865 Extensions of Remarks

May 20, 1980 EXTENSIONS OF REMARKS 11865 EXTENSIONS OF REMARKS The above statistics certainly do not conform to the legislative intent of LIFO. Thus, something must be done to reverse these statistics and help in HON.HENRYJ.NOWAK crease small business' use of LIFO. Small business' desire for simplifica._ OF NEW YORK tion of the inventory accounting rules is not a quest for favorable tax treat ment. It is simply an issue of equity. REASONS FOR NOT USING LIFO The complexity of the law makes proper compliance with current inven tory methods a veritable nightmare. In particular, small business finds it difficult to administer the detailed rec ordkeeping required in order to make a proper LIFO election. This record keeping requires computation of sever al inventory pools or the establish ment of an accurate statistical index. This can only be accomplished by hiring a highly paid tax professional, something a small business person cannot afford. THE CASH METHOD Under the cash method, expendi tures are deducted in the tax year in which they are actually paid. This method simplifies the need for record- e This "bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor. CXXVI--747-Pa.rt 9 11866 EXTENSIONS OF REMARKS May 20, 1980 keeping. It is also suggested that the cost of materials. An art collector, future with other trading nations, cash method would assist small busi however, donating the same piece of that our success in our home economy ness in complying with the law. Small art into the public domain, would re and in world markets is vitally neces farms are presently the only type of ceive a donation equal to the fair sary to our children and their children business entity allowed to use the cash market value. This bill would allow an being able to live as well as we have. method by law. artist to receive a deduction based on To understand the extent and im This special inventory exception for 30 percent of the fair market value of portance of the challenge we face, and farmers was adopted more than 50 the donation. This provision is aimed to understand the directions that an years ago by regulation. The relative at increasing the flow of art for public other nation-perhaps the world's simplicity of the cash method was the consumption, which has all but dried export champion nation at this time primary justification given for allow up as a result of tax reforms in 1969. J apan, has taken to be successful, I ing the exception. It eliminates the This bill is also directed at lessening submit for my colleagues' considera need to identify specific costs incurred the burden of estate taxes on an art tion a recent article by Prof. Ezra F. in raising particular animals.1 ist's heirs by allowing a donation of a Vogel printed in the Wall Street Jour The accounting profession and the piece of art to be treated as a credit nal: Department of the Treasury are gen against estate taxes. The piece of art MEETING THE JAPANESE CHALLENGE erally opposed to allowing small busi would be valued at fair market value nesses, such as retailers, to use the for the purpose of this credit. As an academic observing developments in cash method of accounting. Both see Present law would also be changed East Asia for the past two decades, I have that such a change in the tax law is a gradually come to a disturbing conclusion: departure from generally accepted ac with regard to two separate provisions. The United States is in the process of being counting principles <GAAP). The use First, an individual would be allowed surpassed by Japan as a modern industrial of the cash method, in the eyes of the to claim that an activity is engaged in power, and this creates serious consequences for profit if a profit is made in 2 of 10 America is not confronting. accounting profession, leads to a dis years instead of 2 of 5 years, as is cur Many Americans are aware of the success tortion of income, as there is not a rently the practice. Second, the pre- of individual Japanese products. Japanese proper matching of inco_llle and ex 1976 laws as they apply to copyrights, textiles, produced with cheap labor were al penses. The Treasury Department sees ready inundating the United States in the this as a potential area of tax shelter literary or musical compositions, let 1950s. Since. then, Japan's labor costs have abuse, analogous to the cattle breed ters or memorandums, and similar risen until they are on a par with ours, but ing area. property will be restored. This will re Japanese companies have raised productiv duce the excessive tax burden on un ity and expanded their ability to produce JUNE HEARINGS earned income.e quality products at competitive prices. Even Two additional days of hearings are after World War II, the Swiss continued to scheduled to be held in June on the dominate the international watch market, subject of inventory accounting UNITED STATES MUST MEET but last year the Swiss produced about 50 reform. The Internal Revenue Service million watches while Japanese companies is scheduled to testify on the proce WORLD TRADE CHALLENGE produced about 60 million. Cameras before dures used by agents in their audits of World War II were dominated by the Ger a business' inventory. In addition, sev HON. JOHN EDWARD PORTER mans; they have been replaced by the Japa nese. Americans after World War II enjoyed eral small business groups and the OF ILLINOIS a substantial lead in radios, but we are now American Institute of Certified Public IN THE HOUSE OF REPRESENTATIVES eclipsed by the Japanese. American televi Accountants are scheduled to testify. Tuesday, May 20, 1980 sion was the world leader in the 1960s, but Testimony received at these hear this is now dominated by the Japanese. ings will provide the basis for recom e Mr. PORTER. Mr. Speaker, Presi mendations which will be made to the dent Carter has declared May 18-24 as · CAPACITY AND TRIGGER PRICES Congress for action on this most im World Trade Week to emphasize to Japanese steel plants have a capacity portant small business issue. Much of the people of the United States that roughly the same as the United States or the attention of the 96th Congress has trade is vital to our country's econom almost as much as the entire European Eco been on helping capital-intensive busi ic health. nomic Community, but their capacity is the nesses cope with their capital forma The President is certainly right to most modern and sophisticated in the world tion problems. It is through inventory make such a proclamation and we as we are belatedly acknowledging by using accounting reform that the neglected Japanese standards as the base measure for must all commend him for doing so. determining the "trigger" price. In motorcy labor intensive business sector will But, Mr. Speaker, perhaps all the cles, the dominant four companies in the attain equity as well.e proclamations ought to be put aside American market <Honda, Yamaha, Suzuki and the administration get behind and Kawasaki> are all Japanese. The United some alterations in public policy very States reigned over the automobile indus necessary, in my judgment, to allow try, but last year Japan produced about 10 ARTISTS TAX EQUITY ACT OF our country to compete successfully million cars, about the same as the United 1980 \ on world markets. States, over 100 times the cars it produced 20 years ago. And, Mr. Speaker, we are not doing Japanese abilities are not limited to a HON. RICHARD A. GEPHARDT so, or rather the limited successes narrow range of products. In pianos, hardly OF MISSOURI American businesses are having are a traditional Japanese instrument, in bi IN THE HOUSE OF REPRESENTATIVES largely in spite of discouraging govern cyles, tennis and ski equipment, snowmo Tuesday, May 20, 1980 ment policy, not because of its encour biles, pottery, glass, machine tools, Japan is agements. a strong competitor. In calculators, office e Mr. GEPHARDT. Mr. Speaker, The burdens of excessive regulation, copying machines, Japanese advances are today I join with my colleagues, Mr. the failures to adopt tax encourage impressive. In industrial robots, which pro DODD and Mr. MOFFETT, in introducing vide users with mass production-like effi the Artists Tax Equity Act of 1980. 'ments to investment and export, the ciency for smaller orders, Japan is perhaps This bill will provide much needed tacit and sometimes explicit support the world's leader. In semiconductors, they relief for artists and their heirs and for work stoppages, all may well be already pose a threat to American industry. will, for the first time, make provisions government policies that we simply In banking, by 1978, of the world's largest can no longer afford. Nor will it do for 30 banks, 4 were American and 1 Japanese; in the tax code for inkind payments of our country, when unable to meet the of the top 300, 58 were American, 61 Japa Federal taxes. challenges of international competi nese. Under present law, an artist who do In the international market place, the nates his work to the public domain tion,· to erect and hide behind trade barriers. chronic American trade deficits and con receives a tax deduction equal to the tinuing Japanese trade surpluses suggest What is needed, rather, is a com that Japanese competitive superiority • Report of Ways and Means Committee on Inter plete change in attitude on the part of cannot be explained entirely by Japanese nal Revenue Code section 446, as added by the Tax government, business, and labor, to trade barriers which have been reduced rap Reform Act of 1976 <Public Law 94-455).

Load more