[Congressional Record Volume 147, Number 56 (Monday, April 30, 2001)]
[Senate]
[Pages S4045-S4046]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LIEBERMAN:
  S. 798. A bill to amend the Internal Revenue Code of 1986 to allow 
small business employers certain credits against income tax, and for 
other purposes; to the Committee on Finance.
  Mr. LIEBERMAN. Mr. President, I rise today to introduce legislation, 
the Productivity, Opportunity, and Prosperity Act of 2001, that I 
believe will add some needed POP to our economy and that must be an 
integral component of any strategy to extend our historic economic 
growth.
  The primary goal of the Productivity, Opportunity, and Prosperity Act 
is to protect, stimulate and expand economic growth. Government's role 
is not to create jobs but to help create the environment in which the 
private sector will create jobs. This legislation helps to create the 
right context for private sector growth by providing incentives for 
investment in training, technology, and small entrepreneurial firms. 
These investments are critical to economic growth and the creation of 
jobs and wealth.
  The Productivity, Opportunity, and Prosperity Act of 2001 is a tax 
package with a purpose. And that purpose is, above all else, to 
stimulate private sector economic growth, to raise the tide that lifts 
the lot of all Americans. In the spirit of the ``New Economy,'' where 
the fundamentals of our economy have changed through entrepreneurship 
and innovation, this package includes business tax incentives that will 
spur the real drivers of growth: innovation, investment, a skilled 
workforce, and productivity.
  The first component of this bill is a 30 percent tax credit for 
companies that invest in remedial education for their employees. Many 
companies today recognize that a skilled workforce is critical to 
success and they are eager to invest continuously in their employees. 
However, too often those companies seeking to upgrade worker skills are 
having to first make sizeable investments to simply make up for the 
skill deficits produced by the K-12 education system. For example, in 
my home state of Connecticut, I am aware of one small manufacturer with 
25 employees that will train 20 of them in English as a Second Language 
at a cost of up to $15,000. That is a significant investment and 
commitment by that company. Because too many workers did not learn the 
basic math, reading, and language skills in school, companies have to 
fix these deficiencies first, before they can train their workers on 
more advanced skills. This credit will help to offset those 
investments.
  The bill's second component is a Small Business Digital Divide Tax 
Credit. It would create a 10 percent tax credit for small businesses, 
those with fewer than 100 employees, to encourage investment in 
information technology, for example servers, network hardware, initial 
broadband hookup, PCs, and e-Business software. This credit is critical 
for two reasons. First, because there is truly a small business digital 
divide in this country. Small firms are lagging in the productivity 
growth that has driven the economic boom of the late 90s. While small 
businesses account for 40 percent of our economy and 60 percent of the 
new jobs, less than one-third of them are wired to the Internet today. 
Those that are wired have grown 46 percent faster than their 
counterparts who are unplugged. A recent study by the National 
Association of Manufacturers, NAM, shows that those small manufacturers 
surveyed averaged only about 2 percent of their sales over internet and 
less than 1 percent were in the advanced stages of e-commerce. Without 
expanding productivity improvements to small businesses, we cannot hope 
to sustain the

[[Page S4046]]

economic growth of the last several years.
  The second reason this credit is so important, is that it provides an 
immediate stimulus to our slowing economy. We know today that there has 
been a sharp downturn in technology-related capital spending that has 
helped power our economic growth. For example, Cisco Systems, whose 
products provide the foundation for our digital environment, estimates 
that its sales for the current quarter would be about 30 percent lower 
than the previous quarter and that they would fall again next quarter. 
By some projections, PC sales in this country this year will slow 
dramatically to virtually zero growth. In order to spur near term 
investment and provide an economic stimulus, this credit would be 
available immediately after enactment and through the end of 2002.
  This bill's third component recognizes that entrepreneurship drives 
growth and that small, emerging companies need capital investment to 
innovate, create jobs, and create wealth. According to the National 
Commission on Entrepreneurship, a small subset of entrepreneurial firms 
that comprise only 5-15 percent of all U.S. businesses created about 
two-thirds of new jobs between 1993-96. Although venture capital is 
critical to the transition from a fledgling company to a growth 
company, only a small share of it is associated with small and new 
firms. In addition, we are currently experiencing a venture capital 
slow down that makes it even more difficult for small and new firms to 
attract capital. According to the National Venture Capital Association 
(NCVA), investment in the fourth quarter of last year slowed by more 
than 30 percent from the previous quarter.
  For these reasons, the bill creates a zero capital gains rate for 
new, direct, long term investments by individuals and corporations in 
the stock of small businesses, those emerging, entrepreneurial 
companies that are core to our economic growth. Specifically, this 
legislation excludes from capital gains taxes 100 percent of new, long-
term investments in these capital-intensive small businesses. It also 
changes the eligibility definition of a small business from $50 million 
in capitalization to $300 million while reducing the holding period for 
investments from 5 to 3 years. In addition, it also eliminates 
incentive stock options from the calculation of the Alternative Minimum 
Tax to help high tech employers recruit and retain the skilled 
professionals that are critical to competitiveness in a knowledge 
economy.
  Finally, the bill's fourth component reduces the tax depreciation 
period for semiconductor manufacturing equipment from five years to 
three years, which more closely reflects the actual life of the 
equipment. I believe this component is essential because we know that 
advances in semiconductor technology improve productivity throughout 
the economy. The pace of innovation in the semiconductor industry is 
among the fastest of any U.S. or global industry. Following Moore's 
Law, the semiconductor industry has been quadrupling the number of 
transistors on a chip every three years and studies show that chip 
manufacturing equipment quickly becomes obsolete as these new 
generations of chips are introduced. Semiconductor companies spend a 
greater percentage of their sales on R&D and capital equipment than any 
other industry. Last year, the U.S. semiconductor industry spent 18 
percent of its sales on capital investment and 14 percent on R&D. More 
than 30 percent of this sector's revenue are invested in the future and 
building the New Economy. To promote economic strength, we can no 
longer afford to penalize the semiconductor manufacturing equipment 
industry with tax law that requires a five year cost recovery.
  Ten years from now we will be judged by the economic policy decisions 
we make today. People will ask, did we fully understand the awesome 
changes taking place in our economy and in our society? Did we give our 
industry and workers the environment and the tools they need to seize 
the opportunities an innovation economy offers? I believe that a true 
Prosperity Agenda is within our grasp. Never before has America been in 
a stronger position--economically, socially, or politically--to shape 
our future. But it will take strong and focused leadership. I am 
confident that if we in the public sector in Washington work in 
partnership with the private sector throughout our country, we can 
truly say of America's future that the best is yet to come. I believe 
that the Productivity, Opportunity, and Prosperity Act of 2001 is an 
important step toward that future.
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