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Without question, repeal of the tax credit will crimp the profits of companies in capital-intensive industries. On Wall Street, which generally shrugged off the tax announcement, that prospect depressed stock prices among construction firms, computer-leasing companies, steelmakers and airlines which are in the midst of a costly modernization program. Some small and medium-sized firms may well choose to curtail their factory expansion. At General Motors, the tax credit amounted to $39 million last year, or nearly 4% of its profits. But G.M. does not plan to cut back on its $1.1 billion spending program (up 28% from last year).
Glaring Omission. The Democratic-controlled Congress seems more kindly disposed to Nixon's package than business is. Still, there was little applause from Ways and Means, where Mills hopes to hammer out much more substantial reforms than the President asked for. One particularly glaring omission is the 27½% oil-depletion allowance which Mills maintains has become such a symbol of privilege that it is an essential ingredient of any tax reform.
Mills also faults the Administration's approach to loophole closing as merely papering over tax-system defects that ought to be attacked through more basic changes. The Administration concedes that it has made only a "first stage" effort, to be followed by fuller reform recommendations by the Treasury this fall. Though it disappoints tax-reform idealists, the modest first stage balances the claims of opposing interests deftly enough to make it politically palatable. It also goes much further toward genuine tax reform than almost anyone had expected.