courage that investment, I think that is some sort of a job credit, or something along that line, as well. Senator HATHAWAY. Oh yes, that would be considered. Mr. WARD. When we testified 2 or 3 months ago, one of the things we suggested was some sort of a job credit program whereby the service industries were permitted to get credit for adding people to the payroll, which is, after all, what the whole thing is all about. Senator CURTIS. Is that not the law, now? Senator HATHAWAY. Yes, we incorporated that. Senator CURTIS. If you take them off of welfare rolls? Mr. PENDERGAST. You are talking about the WIN program, are you? Senator CURTIS. Yes. Mr. PENDERGAST. Which I think for a small businessman is a pretty complex thing for him to deal with. I think if he wants to hire craftsmen, or something, to expand his business at a particular moment in time, to get involved in the WIN program for one person or for two people is impractical. Senator HATHAWAY. There was an amendment offered and accepted by Senator Talmadge that would allow you certain deductions for taking a person who was a recipient of welfare and giving him a job. I forget exactly how much you got, but it is quite a tax break. Mr. PENDERGAST. I think there are some qualification problems involved. I think certification and other types of information are pretty complex. Senator HATHAWAY. Regulations might not have been drawn up yet. As it passed, it was a fairly simple program. The person just had to be on welfare for a month or so. You could qualify; you could hire him and get a large reduction. Mr. PENDERGAST. That is one source of additional employees. In my profession, one of the prime sources of additional employees are newly graduated college students who we are not hiring now because we do not need them in the economy. We have no incentive. How do you provide incentive to absorb that group? A lot of the young people who comprise the largest percentage of unemployed are not eligible for welfare for one reason or another. The program I think is complex enough so that most of my clients, small clients do not understand it. It has not been communicated to them properly, and I think there are some paperwork problems involved with it. I think the idea is a good idea; but I think it needs to be made more simple. Senator HATHAWAY. I just wanted to ask one last question of Mr. Mauer. You mentioned on the first page of your statement some Ford Motor Co. studies saying that 80 million people are being supported by tax dollars. Do you have that study that you could submit for the record? I would like to see a breakdown of it? Mr. MAUER. Yes, I have the news report of the study. Senator HATHAWAY. Well, you could argue that 210 million people are being supported by tax dollars, to a certain extent, depending on whether you call something an incentive or a subsidy. Mr. MAUER. I do not not have the actual Ford study, but I do have the news report which I would be glad to submit. Senator HATHAWAY. Good, thank you. [The information referred to follows:] [From Newsweek, June 9, 1975, page 26] PETER AND PAUL Taxpayers have long suspected it, but it took a set of economists at Ford Motor Co. to come up with proof: there are more people being supported by tax dollars than there are workers in the private sector to support them. Adding up government employees, the military on active duty, the disabled and unemployed, the retired and those on welfare, the Ford economists found a total of 80,655,000 tax dependents vs. 71,650,000 nongovernment workers. Senator HATHAWAY. Thank you very much, Mr. Chairman. Could I just ask you one more question which does not really pertain too much to this, but it does pertain to the overall economy? I would like to know, from your personal experience, do you think that the schools and the colleges in this country are adequately training people to take the jobs that you offer them? I am also on the Education Committee; that is why I ask that question. I am very much interested in career education. We had testimony years ago about how 80 percent of high school graduates were not equipped to take much of any jobs whatsoever that they could not have taken without the high school education. We have had similar testimony with respect to liberal arts colleges. We are in the process now of offering amendments to the Higher Education Act. I would like your off the top of your head thoughts on that-or maybe you have more than just off the top of your head thoughts. Mr. WARD. I think it is our experience that our society is educating far too many young students not well for what is required in the economy in the next 10 to 20 years, I think, as opposed to Europe, which educates far too few people exceedingly well. I think our economy appears to require an enormous number of technically skilled people in the future; what we are getting is people with a general education which is in many instances valueless to the general economy. I do not think a liberal arts degree today is worth any more than a high school degree was worth 20 years ago alone, in and of itself. I think it is one of the difficult things that we face. There is a tremendous problem of a tremendous shortage of technically trained people in our economy, and I think this appears to be getting worse rather than getting better. So, I think that we are probably putting far too great an effort as a nation on the general education, than on the specific education. I think a lot of these people would be much better employed in the economy, and ultimately probably a great deal happier, if they had more specific skills. Mr. PENDERGAST. The conundrum that you are involved in very frequently is that although an industry requirement may train somebody for an industry, your particular company might have specific requirements that are quite different. As an example, in my profession of public accounting, we find very frequently that if you look ten years down the tube, the best qualified professional is a man who had a liberal arts education. The technically competent man who started out with a technical education is allowed to go only to a certain skill level, and then he cannot handle or cope with broader responsibilities. So, it becomes a very difficult, again, almost a chicken and the egg type of complex problem. Take people with a technical education. One of the major accounting firms gives them four weeks of in-house training right off because they do not understand how to do the basic parts. So, the first two or three years are difficult; but as time goes on, that broad based background allows them to cope with a broader range of problems. So, I do not know the answer to that. Senator HATHAWAY. Thank you very much. Senator NELSON. Mr. Mauer, I understand that the Wisconsin Independent Business Association has done some kind of a study on the impact of mergers on local ownership-the effects of absentee ownership. Mr. MAUER. We are doing some work in that area, Senator, but also the University of Wisconsin has been doing some very interesting studies on those kinds of impact, of merger acquisitions. I do have some of those studies. I do not have them here with me; but I would be glad to furnish them to you. Senator NELSON. Who is heading up the University of Wisconsin study? Mr. MAUER. The initial study was done by Professor Jon Udell at the Graduate School of Business there. Senator NELSON. Anything you have on that we would be glad to have for the record.1 Mr. MAUER. Certainly. Senator NELSON. Thank you very much, gentlemen. You have given a very useful contribution to these hearings. I appreciate your taking the time to come. The hearings will open at 9:30 tomorrow in the same room. [Whereupon, at 12:15 p.m., the Committees recessed, to reconvene at 9:30 a.m. on Thursday, June 19, 1975.] 1 NOTE. The study, entitled "Social and Economic Consequences of the Merger Movement in Wisconsin," by Jon G. Udell, Graduate School of Business, University of Wisconsin (May 1969) is reprinted in the record as Appendix VI. SMALL BUSINESS TAX REFORM THURSDAY, JUNE 19, 1975 U.S. SENATE, SELECT COMMITTEE ON SMALL BUSINESS, Washington, D.C. The committees met, pursuant to notice, at 9:45 a.m., in room 2221, Dirksen Senate Office Building, Senators Gaylord Nelson (chairman of the Select Committee on Small Business), and Lloyd Bentsen (chairman of the Subcommittee on Financial Markets of the Committee on Finance). Present: Senators Nelson, Bentsen, Clark, Haskell, Packwood, and Laxalt. Also present: Herbert L. Spira, tax counsel, Select Committee on Small Business; Richard R. Rivers and Michael Rowny, professional staff, Senate Finance Committee; and David Allen, office of Senator Bentsen. Senator NELSON (presiding). The hearings will be open. We will call first this morning on Mr. Edward Richard, who was to be on yesterday's panel, so that he can present his testimony; and then we will move to the witnesses scheduled for today. (The prepared statements of Senators Nelson and Bentsen follow :) STATEMENT OF HON. GAYLORD NELSON, A U.S. SENATOR FROM THE STATE OF WISCONSIN This is the third day of joint hearings on the business tax structure as it affects smaller firms. During the past two days we have seen some fine presentations on basic questions of taxation and capital markets as they affect the survival and profitability of smaller ventures and the future of our free private enterprise system. We have benefited from the observations and questions of members of both the Senate Small Business Committee and the Senate Finance Committee. We appreciate the efforts which today's witnesses have made to prepare their statements and are looking forward to hearing them at this time. STATEMENT OF HON. LLOYD BENTSEN, A U.S. SENATOR FROM THE STATE OF TEXAS Today we begin the third of a three-day set of hearings by the Senate Financial Markets Subcommittee, which I chair, and the Small Business Committee, which is chaired by Senator Nelson. We will receive testimony this morning on the farm credit crunch problem and also on the scarcity of venture capital for commercial businesses. Since 1969 farm debt has increased 80%. While net farm income in 1974 fell 37% to $26.9 billion, farm indebtedness increased about 25%. Thus it is important for these Committees to review the financial needs of agricultural as well as commercial businesses. |