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House Approves Tax Revision Bill : Plan Would Transfer $140 Billion From Individuals to Corporations

December 18, 1985|KAREN TUMULTY and TOM REDBURN | Times Staff Writers

WASHINGTON — The House, which last week refused even to consider legislation to overhaul the nation's tax code, reversed itself Tuesday night and approved the bill, sending it to an uncertain fate next year in the Senate.

The bill, which loosely follows the outlines of an earlier proposal by President Reagan, would reduce the top individual tax rate from 50% to 38%. While some taxpayers would have to pay more, most would come out ahead and the average taxpayer would enjoy a 9% tax cut.

All told, the bill would shift about $140 billion of the nation's tax burden during the next five years away from individuals and onto corporations.

House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), hoisting a glass of champagne after the vote, said: "This toast is to the American taxpayer. They won a big victory tonight."

'Historic Step'

And President Reagan, in a statement issued by the White House, declared: "Today, the House of Representatives moved us one historic step closer toward a new tax code for America. We now look to the Senate to move quickly and make all necessary changes to ensure that the final bill is unequivocally pro-family, pro-jobs and pro-growth."

After a week of wrangling between the White House and House Republicans for enough support to assure the bill's passage, the issue was decided on a voice vote, leaving no way to determine the margin of victory.

Whether the failure to record individual votes came by design or accident remained unclear. House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) said he was "awed" that no congressman called for a recorded vote when given the opportunity, but he refused to backtrack when outraged GOP congressmen demanded one later.

In the closest measure of sentiment, House Republicans were defeated, 256 to 171, in an effort to send the bill back to the Ways and Means Committee.

Earlier, the House voted 258 to 168 to approve the ground rules for debating the bill, a dramatic turnaround from last Wednesday's 223-202 vote against the ground rules. A personal lobbying campaign by Reagan helped reverse the outcome.

Most Republicans continued to oppose the measure, even though Reagan had made it his top legislative priority of the year. Of the House's 182 Republicans, 49 supported the bill in the final recorded test of sentiment--the vote to send the bill back to the committee--more than triple the 14 who supported it last Wednesday.

Before approving the bill basically as written by the Democratic-controlled Ways and Means Committee, the House handily defeated a Republican alternative that would have shifted less of the tax burden from individuals to businesses. The vote was 294 to 133.

Ailing Industries

Republican opponents had contended that the Ways and Means legislation would dampen economic growth and that it did not go far enough in reducing tax rates. Joining them had been Democrats representing states heavily dependent on oil, timber and heavy manufacturing, ailing industries that complained that the tax bill would depress them still further.

Although House Republican leaders remained almost unanimously opposed to the bill, some were persuaded by the White House this week to quit trying to block the measure from reaching a vote.

In return, Reagan promised in a letter to House Republicans that he would veto any bill ultimately passed by Congress that did not assure "increasing incentives for economic growth and jobs, and greater fairness for individual Americans and their families."

As "the minimum requirements for a tax reform bill I am willing to sign," Reagan listed a $2,000 personal exemption for all lower- and middle-income taxpayers, "basic tax incentives" for heavy industry, a minimum tax that would prevent individuals and businesses from escaping taxes and a top individual tax rate no higher than 35%.

The Ways and Means bill would levy a 38% maximum rate compared to the current 50%. It would increase the personal exemption, now $1,040, to $2,000 for taxpayers who do not itemize their deductions but only to $1,500 for itemizers. And it would strip business of many of its tax incentives.

No Early Senate Action

The Senate will take its turn with the tax bill next year but key senators have indicated that they probably will not act on it until mid-1986 at the earliest. Senate leaders then would be faced with the unwelcome prospect of drafting their own version of the controversy-ridden measure in an election year in which continued Republican control of the Senate will be at stake.

In the heat of next year's campaigns, Reagan may have problems finding enough senators who are willing to make the politically risky choices that would produce eventual legislation meeting the standards spelled out in his letter to House Republicans. Rostenkowski said after the House vote that the bill faced "a rocky road in the Senate."

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