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Action Part of Deficit Reduction Agreement : Senate Votes to Raise $9 Billion More in Taxes

December 11, 1987|KAREN TUMULTY | Times Staff Writer

WASHINGTON — The Senate early today approved $9 billion in higher taxes, its first step in implementing a $30-billion deficit reduction agreement reached last month after agonizing negotiations between President Reagan and congressional leaders.

Approval came on a voice vote after the Senate turned down, on a vote of 71 to 25, an alternative that claimed even greater deficit reduction through freezing most federal programs at last year's spending levels.

Senators also stripped the bill of a provision that would have written into law the so-called Fairness Doctrine requiring broadcasters to allow opposing views on issues to have equal access to the airwaves.

To Pare Deficit

The higher taxes, combined with spending cuts embodied in legislation that is expected to reach the Senate floor today, would pare $30 billion from this year's projected $180-billion deficit. However, the measures still could leave a budget deficit larger than the $148 billion recorded for the fiscal year that ended Sept. 30.

Thus, many in and out of Congress have complained that the package does not go far enough, particularly in the wake of the Oct. 19 stock market collapse, which was blamed in part on the deficit.

Sen. Ernest F. Hollings (D-S. C.) spoke of the plan scornfully as an effort by lawmakers "to give themselves a good government award for cutting the deficit." He contended that many of the claimed savings amount to "smoke and mirrors," and he predicted that the plan ultimately will reduce this year's deficit by no more than $20 billion.

Held Best Package

But Senate leaders argued that the package is the best compromise that could be reached by negotiators trying to reconcile the conflicting philosophies of a Republican Administration and a Democratic Congress.

Senate Majority Leader Robert C. Byrd (D-W. Va.) described the package, which its backers claim will reduce the deficit by $76 billion over two years, as "the practical, the do-able, the attainable."

"The markets at home and around the world may not be overjoyed by what we have done," Senate Budget Committee Chairman Lawton Chiles (D-Fla.) conceded. "But consider the reaction had we failed to achieve an agreement. And consider the prospects of what might happen if, in these last days of the (congressional) session, we fail to approve the package we promised."

Gramm-Rudman Cuts

One immediate consequence of failure to pass the legislation would be that $23 billion in indiscriminate spending cuts already in effect temporarily under the Gramm-Rudman deficit reduction law would become permanent. The cuts would be divided equally between most domestic programs and defense spending and could sharply curtail the budgets of some government agencies.

In part to protect military spending from the Gramm-Rudman cuts, President Reagan reluctantly agreed to support $9 billion in new levies, which was a major retreat from his pledge not to raise taxes.

Except for its three-year extension of the expiring 3% telephone excise tax, the bill would force businesses and wealthy individuals to shoulder most of the burden in additional taxes. Included are:

--Extending estate and gift taxes at the current rates for the next two years, rather than allowing them to fall, as scheduled, next year.

--Ending the current child care tax credit available to those who send children to overnight camp.

--Requiring large family farms, real estate firms and large manufacturers to use what are usually less advantageous accounting methods when they figure their taxes.

Social Security Taxes

--Requiring workers and their employers to pay Social Security taxes on income the workers receive as tips. Others who would be required to pay Social Security taxes include non-active-duty military reservists, on their military pay, and 18- to 21-year-olds who work for their parents' businesses.

The bill touches a wide range of interest groups. Indeed, some of the most passionate debate of the day centered on the relatively obscure issue of how huge chicken-farming businesses account for their profits.

Also included in the measure is almost $6 billion in reductions in entitlement programs. Almost a third of those cuts would come from Medicare, where the government would reduce the amounts it pays doctors and hospitals.

But even as the Senate debated the measure, the White House raised threats of a veto over provisions that Reagan finds objectionable. Among them are provisions setting new agricultural policies that Administration officials contend would set back efforts to bring U.S. farm prices in line with those on world markets.

Objects to Proposal

The Administration had also objected to writing the Fairness Doctrine into law, an effort that Reagan already has vetoed once this year. The Federal Communications Commission repealed the 39-year-old doctrine shortly after Congress moved to make it a law.

Although the Senate removed the Fairness Doctrine from its bill, the issue remains alive because the House included the doctrine in its version of related deficit-reduction legislation. Both versions will go before a House-Senate conference committee.

Also removed from the Senate measure was a politically sensitive provision that would have imposed fees on the transfer of broadcast licenses when stations are sold. The proceeds would initially have been used to reduce the deficit, but after 1990, they would have gone into a trust fund that would have been used to fund public broadcasting.

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