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$9-Billion Tax Plan OKd; House Votes Spending Bill

December 22, 1987|KAREN TUMULTY and JOSH GETLIN | Times Staff Writers

WASHINGTON — The House and Senate late Monday approved a measure raising $9 billion in new taxes this fiscal year--the first of two installments in a $33-billion deficit-reduction plan agreed to last month by President Reagan and congressional leaders.

Meanwhile, the House narrowly approved the second part of that package, which is contained in a $600-billion spending bill. Negotiators cleared away the last obstacle when they agreed not to insist that the bill include a provision requiring broadcasters to offer air time to opposing viewpoints.

However, the spending bill was almost defeated by liberal House Democrats, who objected to provisions in the measure providing interim aid for the Nicaraguan Contras. The measure was passed on a 209-208 vote with the help of Republicans who favored such aid.

The President is expected to sign both measures, but some predicted that Congress would not complete final work on the legislation until today. The two bills are the only business that Congress must complete before it adjourns for its Christmas recess.

The tax legislation passed the House in a 237-181 vote. Support was largely Democratic; Republicans voted against the bill by an almost 3-to-1 margin. In the Senate, the tax bill was passed on a 61-28 vote.

In addition to raising taxes by $38 billion over three years, the measure also includes additional deficit reduction to be accomplished through sale of such government assets as loan portfolios; reductions in spending on federal benefits programs, such as Medicare and Medicaid, and new user fees for government services.

The brunt of the new taxes would fall on corporations and high-income individuals. The primary effect to be felt by most Americans would be an extension of the 3% telephone tax that had been scheduled to expire next year.

The savings in Medicare and Medicaid would come primarily from reducing government payments to hospitals, doctors and others providing health care to program recipients.

However, the elderly would also be forced to pay for part of the savings. The "supplementary premium" they now pay for certain types of outpatient care, which was scheduled to lapse in fiscal 1989, would be extended by the legislation.

Farm, Postal Cuts

Additional cuts are slated for agricultural programs and the U.S. Postal Service, which will be required to delay some construction projects.

A particularly controversial provision in the tax bill was a proposal by Rep. Henry A. Waxman (D-Los Angeles) to impose an excise tax on certain vaccinations. The funds would compensate victims who were injured by vaccinations received when they were children. The White House had opposed this proposal.

Another dispute in the tax measure centered on a provision, primarily sponsored by Rep. Charles B. Rangel (D-N.Y.), denying foreign tax credits to U.S. companies on income earned in South Africa. Sens. Jesse Helms (R-N.C.) and Richard G. Lugar (R-Ind.) have blasted the proposal, calling it an attempt to legislate "at the midnight hour and through the backdoor."

White House and congressional negotiators went to work on the deficit-reduction plan in the wake of Oct. 19's stock market crash, which was blamed in part on a deficit that was projected to reach $180 billion this year if budget and tax policies went unchanged.

Preferable to Gramm-Rudman

Although few in Congress were enthusiastic about the plan, they considered it preferable to their other option: allowing the Gramm-Rudman budget-balancing law's spending cuts to become permanent.

Half of the Gramm-Rudman law's $23 billion in spending cuts would have come from the defense budget--a prospect severe enough to force even President Reagan to drop his adamant opposition to higher taxes. By comparison, the deficit-reduction plan reduces projected military spending by only $5 billion.

But Reagan's support was not enough to blunt criticism by other members of his party.

Rep. Hal Daub (R-Neb.) said: "This bill is outrageous. There are no savings in here. . . . It's smoke-and-mirror money. My office has been inundated with complaints about tax increases. That's not what people want."

Rep. Delbert L. Latta of Ohio, the ranking Republican on the House Budget Committee, added: "Let's not kid ourselves. You've got $9 billion in hard taxes in this bill. And what are you going to do with the money? You're going to spend it. That's not the way to run this government."

See Unrealistic Claims

Opponents have contended that the plan will never live up to its claims of cutting the projected deficit by roughly $80 billion over two years. They say it is loaded with one-shot savings, rather than long-range changes in taxation and spending patterns.

For example, about one-sixth of its savings--$5.4 billion--come from allowing foreign purchasers of military goods to pay back their loans and refinance them privately at lower interest rates. While this will yield a windfall this year, it is projected to actually worsen the deficit in the long run by up to $2.8 billion.

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