Distributors Anticipate Lighter Tax Burden

In an effort to revive the sluggish economy, President Bush recently announced the strategy that will be the backbone of his proposed 2003 stimulus package: to relieve U.S. business owners of unnecessary tax burdens.

Distributors in the sanitary supply industry have been outspoken in their desire to permanently repeal the estate or “death” tax, reduce the federal unemployment tax, and accelerate income-tax relief, but those are just a few of the proposed measures. President Bush stated that corporate tax issues are still vital to the economy’s turnaround, and that lawmakers should work hard to put solutions in place.

Most distributors say they believe that the Republican-controlled Congress will fight for more tax relief on Capitol Hill. “Typically, the Republican party is kinder to business interests than the Democratic party is,” said Marty LaBarbera, president of All-Brite, a distributor in Jacksonville, Fla. “I definitely feel that the tax-relief efforts will be good for business and for our industry.”

However, the stimulus package, which would increase the annual expense limit for businesses to $75,000 (up from $25,000), will likely wait until April or May to pass the House and Senate.

“It won’t go through immediately, and it won’t go through unchanged,” said Jade West, senior vice president of government for the National Association of Wholesaler-Distributors (NAW). “Senator Grassley (R-Iowa) has said that they will focus on confirming John Snow as the new Treasury Secretary before they focus on budget proposals. Then, [tax breaks for business owners] will be considered as part of the budget proposal, and that will have a ceiling that will allow for a certain amount of tax relief.”

While increasing the expense limit will not significantly impact larger companies, it will provide much-needed relief for many small and medium-sized distributors who will use the extra revenue to grow their businesses.

“The proposal is very good news for America’s 25 million small business owners and their employees,” said Hector Barreto, administrator for the Small Business Administration (SBA) in Washington. “An increase in the expensing for new investments would encourage small business owners to purchase the technology, machinery and other equipment they need to expand.”

In addition to giving sanitary supply distributors mobility to invest in equipment, the increase would also allow many owners to increase their workforce and their productivity.

“Two years ago we reported a loss,” said LaBarbera. “Last year we broke even. That money that we’re losing in taxes isn’t just profit — it’s money we would be using to pay another employee, which we desperately need right now, but can’t afford.”

Business owners continue to push for the permanent repeal of the death tax as well. “If there is any single concern that business has expressed to the White House, it is the need to permanently repeal the death tax,” said West. “I personally raised the issue with Congressman Tom DeLay (R-Texas) recently, and he assured me that it is still on the front burner.”

Most Washington observers appear to be confident that the death tax, which takes a portion of earnings from businesses when the owner dies, will be permanently repealed this year. Currently, the death tax repeal is set to end in 2011, however lawmakers have stressed the importance of cutting down insurance costs for business owners by making that repeal permanent in 2003.

“Our company pays a lot of insurance premiums in order to minimize the possible effect of the death tax,” said LaBarbera. “We pay high premiums to protect our owner’s son, who will be the owner of All-Brite himself someday.”

G-P Closes Florida R&D Operations

Georgia-Pacific Corp., Atlanta, recently announced that it will close its research and development operations in Palatka, Fla. G-P spokesman Jeremy Alexander said the Palatka Technology Center is being consolidated with the company’s North America consumer products research and development operations in Neenah, Wis.

Seven Palatka employees, ranging from R&D assistants to engineers, will lose their jobs, according to Alexander. The decision was not a reflection of the employees’ work, he added. “It’s just a matter of the greatest efficiency for the consumer products business and Georgia-Pacific. The Palatka [paper] mill is not going to be affected by this change.”

Georgia-Pacific has been consolidating its resources in Neenah for throughout the past two years. “The vast majority of our research and development is already conducted there,” said Frank Murray, G-P vice president of product development.

At the recent American Society of Cell Biology meeting in San Francisco, scientists revealed that the widespread African killer, “sleeping sickness,” might be treated with ordinary hand soap — or, more accurately — the cheap antibiotic triclosan that is found in most hand soaps.

Transmitted by the Tsetse fly, the disease affects up to one-half million people in rural sub-Saharan Africa. Kimberly Paul of Johns Hopkins School of Medicine, Baltimore, and her team found that the causative parasite, Trypanosoma (which comes from the Tsetse fly), stops growing in a tube infused with triclosan.

Triclosan can be found in most cleaning products, and almost all solutions for personal washroom hygiene: “You can’t find a hand soap without it,” said Paul. The Trypanosoma-combatant looks to be an improvement on existing drugs, such as arsenic derivatives, which are toxic to patients.

The antibacterial agent will attack the parasite, but not the human cells. “That’s what I find very exciting,” said Paul.

News Makers

Cascades Inc., Kinsey Falls, Quebec, recently announced that it plans to substantially refinance all of its credit facilities and credit lines, including those of its subsidiaries. The company said that it will issue $325 million of new debt securities in a private placement.

Public schools in Decatur, Ill., have banned the use of cologne, deodorant and other spray fragrances. Both of the city’s high schools and all four middle schools have adopted the ban, which was suggested after school health officials noticed an increase in allergic reactions to scented sprays.

Kimberly-Clark Corp., Dallas, was recently named one of the 100 best companies to work for in America by Fortune magazine. Fortune partnered with the Great Places to Work Institute to select the top 100 companies. Kimberly-Clark made the list last year as well, but rose from a 2002 ranking of 92 to a 2003 ranking of 69.

Texas Feathers, Arlington, Texas, has changed its name to TxF Products. The manufacturer of dusters and brushes will continue to use the Texas Feathers name to market products.

Scot Young Research Products Inc. (SYR), St. Joseph, Mo., recently announced that the company has filed a lawsuit against ABCO Products Corp., Miami, Fla., alleging infringement of its patented Changer mop. SYR seeks an injunction and unspecified damages based on the amount of ABCO Products sales.

Mergers and Acquisitions

SCA, Stockholm, has announced that it will sell its minority shareholding in Metsa Tissue to the main owner, M-real. SCA will capitalize assets totalling Euro 71 million, which corresponds to SEK 650 million or $75 million.

Sunshine Industries Inc., Cleveland, has announced that the company’s chief financial officer (CFO), Nicholas J. Chuma, will acquire the cleaning product manufacturer from the company’s current owner, Leonard Naft. Naft, president, and Don Leventhal, vice president, represent the third generation of the founding family.