The Senate Finance Committee is expected to vote today on a proposal to provide a tax credit for college tuition expenses - despite pleas by President Carter to abandon that plan in favor of increased federal scholarships.
Sen. Russell B. Long (D.La.), chairman of the panel scheduled a closed session this morning to consider tacking the measure onto a minor tax bill rather than waiting for formal House action. The credit is expected to be approved overwhelmingly.
Meanwhile, the administration was dealt a blow on another effort to hold down an increase in existing tax breaks - this time on the issue of whether to postpone the tougher tax treatment of Americans working abroad that Congress voted in 1976.
In a surprise move, the General Accounting Office issued a report recommending continuation of sizeable tax breaks for U.S. citizens living abroad, contending that going along with the 1976 law would hurt U.S. exports. The administration has backed the 1976 "reforms."
At the same time, two top officials aaid the administration does not want Congress to re-open the question of how to finance the Social Security system, despite earlier suggestions to the contrary by Secretary of the Treasury W. Michael Blumenthal.
In separate forums, Joseph A. Califano, the secretary of Health, Education and Welfare, and Charles L. Schultze, the president's chief economist, said the administration has not finished studying the situation. They said the President Carter's tax-cut package would provide relief temporarily.
Action on the tuition credit could prove a setback for the administration which is trying to head off enactment of such legislation by pushing through a rival bill to extend existing federal scholarships to middle-income students.
House and Senate education commitees are racing to approve legislation that would enlarge the present federal scholarship programs. Long noted yesterday, however, that the tuition credit is favored by a clear majority of the Finance Committee.
The [WORD ILLEGIBLE] was expected to add to pressures in Congress to postpone the provision again and to dilute it by adding special deductions for education and housing costs. The measure was one of the key "loopholeclosing" provisions in the 1976 Tax Reform Act.
In response to heavy lobbying by multinational construction firms, the House Ways and Means Committee is scheduled to meet this morning to take up the issue. The Finance Committee voted earlier to defer the 1976 law until next year and to soften it somewhat.
Meanwhile, a representative of the Arabian-American Oil Co. told Congress a recent Internal Revenue Service ruling depriving it of foreign tax breaks for royalties it pays to Saudi Arabia would not force the firm to pay more taxes - because the Saudis have changed their pricing system.
At the same hearing, Jerome Kurtz, commissioner of IRS, conceded the ruling was a narrow one, but hinted that future rulings involving royalties may be tougher on the oil companies. Kurtz said the latest decision was designed only to "wipe the slate clear" of previous policy.
The GAO report on the overseas tax issue contained some major disparities. Although the comptroller's recommendation implied continued tax breaks were needed to bolster exports, the report itself concluded the 1976 changes would have little effect on exports.
Sources indicated the recommendation was rewritten just before the report was issued, presumably at the direction of Elmer B. Staats, the comptroller general, to emphasize the case for continued tax breaks. Staats was not available for comment late yesterday.
The GAO recommendations generally contradict those of the Carter administration and the congressional Joint Committee on Taxation, both of which have insisted the pre-1976 law needed to be changed because taxpayers living overseas were enjoying disproportionate breaks.
Many tax experts have felt that the 1976 changes may have hurt construction firms and those living in high inflation areas such as Saudi Arabia, but would have only a modest impact on Americans in other sections.
Meanwhile, a group of liberal congressmen led by Rep. Henry S. Reuss (D-Wis.), chairman of the House Banking Committee, urged the Carter administration to withdraw its proposal for allowing a tax credit for new plant construction on grounds it would encouraged firms to leave the cities.
Along with Reuss, the group included Reps. Elizabeth Holtzman (D-N.Y.), Paul Simon (D-III.) and Michael Harrington (D-Mass.). Holtzman and Simon are on the House Budget Committee and Harrington is chairman of the Northeast-Midwest Economic Advancement Coalition.
In discussing the tuition tax credit proposal, Long did not say which way he would vote on the measure. The Finance chairman has supported one plan by Sen. William V. Roth (R-Del.) that would allow the writeoff for college tuition costs.
However, Long said he still would "have to be persuaded" to back a rival proposal by Sens. Daniel P. Moynihan (D.N.Y.) and Bob Packwood (R-Ore.) to extend the credit to parents of elementary and secondary school pupils as well.
The Packwood-Moynihan bill would cost $4.7 billion, while the Roth plan would cost $1.3 billion. The administration opposes both as too costly and wasteful. The administration's plan would add $1.1 billion to existing costs.