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Clinton offers incentives for more worker benefits

Businesses could receive tax incentives for expanding workers' pension, retirement and education plans under the budget President Clinton proposed Monday. The budget also would give tax breaks to employees who lose their jobs.

On the other hand, it would end several devices that moderately wealthy Americans use to avoid paying estate taxes and would impose 39 business-tax increases.To help workers save, the administration proposed letting them use payroll deductions to contribute to Individual Retirement Accounts. To encourage businesses to allow those deductions and to get more businesses to adopt 401 and similar plans, the administration proposed new tax credits of up to $2,000 per company over three years, aimed primarily at small businesses.

Only about one-fourth of American workers have 401 or similar retirement savings plans, according to the Employee Benefits Research Institute, a nonprofit organization in Washington.

These proposals are likely to find favor with Republicans, who have championed expanding retirement savings plans and easing regulation of them.

The administration proposed to extend a variety of business tax breaks, including a welfare-to-work credit, educational grants to employees and a research and experimentation credit. It would also make permanent a provision of the 1997 Taxpayer Relief Act that allows companies to treat the costs of cleaning up toxic-waste sites as expenses that can be immediately deducted, instead of capital investments that must be amortized over many years.

The administration also proposed a variety of tax credits for businesses that invest in energy-efficient equipment and roof-top solar collectors. Buyers of very highly fuel-efficient vehicles could receive $4,000 per vehicle in tax credits in 2002. Those buyers are likely to be corporations.

For workers who lose their jobs, the administration would eliminate taxes on the first $2,000 of severance pay. It is unclear whether this would be a boon to workers or simply encourage companies to reduce the size of severance packages.

The administration also proposed extending the current law allowing up to $5,250 a year in educational aid to be taken as a deductible expense by employers, but not to be counted as income for workers.

The administration wants to expand a tax break for investors in about 80 companies licensed under the Black Capitalism program begun 29 years ago by the Nixon administration.

Investors who buy shares of Specialized Small Business Investment Companies would be allowed to roll over $2 million in capital gains, deferring taxes so long as they held shares of the specialized companies. The current limit is $50,000 per year, a figure that critics say is too small to create a significant capital market for minority and immigrant entrepreneurs.

Only one of these companies, Freshstart Venture Capital Corp. of New York City, has publicly traded shares.