WASHINGTON — Democrats on the House Ways and Means Committee resolved competing demands for relief from a proposed energy tax Wednesday and reached agreement on a bill containing the largest tax increase in history, congressional sources said.
Rep. Dan Rostenkowski (D-Ill.), chairman of the tax-writing panel, briefed President Clinton on the outcome of two days of meetings among committee Democrats. A formal vote by the panel was expected today.
Details of the agreement were being closely held Wednesday night, but Rostenkowski said they would include changes in the President's proposed broad-based energy tax to accommodate objections from farm-state Democrats and other special interests.
Such changes, he said, were needed to ease the bill's passage through the House.
"There are loose ends--we haven't concluded our deliberations," he said. But Rostenkowski scheduled a meeting of the full committee for this morning, a clear signal that he expected to have the bill ready for a vote by then.
"Everybody's happy," said one source, referring to the 24 Democrats who hold a commanding majority on the 38-member committee. Republicans on the committee, who all oppose Clinton's proposed tax increases, were effectively frozen out of the deliberations to shape the bill.
After approval by the committee, the gigantic revenue bill, a key part of Clinton's economic program, would then move on to the House floor later this month, where approval appeared likely.
In the Senate, however, the tax bill is certain to run into heavy Republican opposition and undoubtedly some Democratic defections, making the ultimate shape of the bill far less clear.
Unlike the President's $16.3-billion stimulus package, however, which was killed by a Republican filibuster, the tax bill will be considered in the Senate under special rules that impose a strict time limit on debate so a final vote must be taken. Democrats, who need only a simple majority to pass the measure, hold a 57-43 advantage in the Senate.
Overall, the bill would raise $337 billion in revenue and confer tax breaks totaling $95 billion over the next five years, with the heaviest impact on high-income individuals earning more than $115,000 a year and couples earning above $140,000.
In addition, the bill would raise income taxes on Social Security recipients with incomes of $25,000 or more for an individual and above $32,000 for couples.
Controversy within the closed-door sessions apparently focused on the energy tax, which is expected to raise $70 billion in revenues over the next five years. Farmers, airlines, aluminum smelters and other groups pleaded for exemptions or other relief, spurred by reports that the White House already had granted concessions to utility companies and other energy producers.
The energy tax, which would be phased in gradually starting in 1994, also became the focal point for Democratic critics on grounds it would unfairly burden some forms of energy and some parts of the country. Under Clinton's original proposal, it would kick in next year and go up gradually to raise $22 billion a year by 1998.
The biggest change in the President's original plan came earlier in the deliberations, when the committee scuttled his proposed two-part investment tax credit for large corporations and smaller firms, which would have reduced their taxes by $30 billion over five years.
Responding to widespread criticism of the plan from both business and rank-and-file Democrats, the panel decided to provide tax relief in the form of a smaller increase in the corporate income taxes, raising it to 35% instead of 36% as the President asked.
In addition, smaller firms would benefit from another change that would allow them to deduct the cost of machinery and equipment up to $25,000 a year, rather than the $10,000 limit in the present law.
The hard-driving Rostenkowski, aware of how tough it can be to get a big tax increase through the House, took pains to reshape Clinton's proposal to ensure that it will get the 218 votes required for passage in the 435-member chamber.
Speaking with reporters after Wednesday's caucus, however, he seemed to be appealing to Clinton as well to do more to drum up support for the bill.
"I think the Administration, never having written a tax bill, doesn't realize that you have to get supporters out there . . . suggesting to the American people that this is good for the country," he said.