WASHINGTON - With good times rolling and black ink flowing, President Clinton's budget for fiscal 2000 was expected to have something for everyone. But, it turns out, something is not always a good thing.
He has proposed, for example, eliminating the deductibility of punitive damages in lawsuits.
Car companies are frequent targets of litigation and sometimes must pay punitive damages. DaimlerChrysler Corp., for one, is fighting a $250 million punitive damage award in a minivan rear-latch case.
Even if an insurance company pays the damages, the Clinton proposal would add the amount to the insured person's or company's gross income for tax purposes.
Treasury Department officials said last week that allowing the payments to be deducted, essentially spreading the cost to other taxpayers, 'undermines the role of such damages in discouraging and penalizing certain undesirable actions or activities.'
Steven Hantler, DaimlerChrysler assistant general counsel, said in response, 'We have not completed our review of the president's budget proposal, but we should be very careful that, in reforming the tax system, we don't further damage the legal system, which is already spiraling out of control.'
The proposal is one of many so-called loophole closers that Clinton included in the $1.8 trillion budget to raise revenue for more spending elsewhere.
Another proposal, to tax the investment income of trade associations, quickly caught the attention of the National Automobile Dealers Association and the American International Automobile Dealers Association.
AIADA President Walter Huizenga said the cost to his association would not be large, but, he added, 'Certainly, this is one we are going to work to see defeated.'
Mary Jo Eustice, lobbyist for the more heavily invested NADA, agreed that the proposal is provocative, but, with both houses of Congress controlled by Repub-licans, she suggested it and other tax ideas may not go far.
Yet, even with a hostile Con-gress, the president's budget is a starting point for debate. Often in the give-and-take of negotiations, ideas thought to have little chance become law.
Other Clinton budget proposals with potential impact on the automobile industry include:
A revised plan for tax credits for the purchase of energy-efficient, advanced-technology vehicles.
A 10 percent increase in funds for the Partnership for a New Generation of Vehicles.
A 12 percent boost for the National Highway Traffic Safety Administration.
A 53 percent increase, to $271 million, for intelligent transportation systems - programs that promote the use of advanced technology in vehicles and on highways to improve traffic flow.
ESTATE TAX IS ISSUE
The biggest budget fights will be over the president's plan to set budget surpluses aside for Social Security and Medicare and over Republican hopes for a broad tax cut.
NADA and AIADA see the Republican emphasis on tax cuts as a chance for them to push for a repeal of the federal estate tax. With a maximum rate of 55 percent, it can be an unreasonable burden on family-owned dealerships, they say.
Clinton's proposal for tax credits up to $4,000 for the purchase of an energy-efficient, hybrid-powered car or truck is part of his package of ideas to combat global warming.
The administration proposed similar credits a year ago, but they went nowhere in Congress, in part because of opposition from the former Big 3. The companies complained that that version, based only on fuel economy numbers, would not necessarily create a market for new kinds of powerplants.
MORE MONEY FOR PNGV
General Motors spokesman Bill Noack said the revision 'is a step in the right direction,' and GM 'looks forward to working with the administration on the details.'
Other incentives would be offered to companies to cut emissions of gases from their plants and facilities - principally carbon dioxide, which may be accumulating in the atmosphere and altering the world's climate.
Even the Global Climate Coalition, which includes auto companies and which has been sharply critical of the administration on global warming, applauded the budget for its emphasis on voluntary action and research and development.
The 10 percent boost for the Partnership for a New Generation of Vehicles would raise its 2000 funding to $264 million. The cooperative effort among the former Big 3, research institutions and government is aimed at producing 80 mpg family sedan prototypes by 2004.
A 12 percent increase at NHTSA would raise its spending to $404 million.
While some of the increase is aimed at boosting seat belt use and reducing drunken driving, NHTSA Administrator Ricardo Martinez said the money also would help pay for agency efforts to improve airbag systems and to incorporate other electronic safety devices into vehicles.
Martinez aides said higher funding also will help pay for the research that must be done before the agency can add offset crash tests to vehicle certification requirements, boost side-impact protection and combat vehicle rollover dangers more efficiently.