The House leadership balked yesterday at supporting an administration - backed attempt to revamp key provisions of the pending tax-cut bill - raising the possibility that the White House may not even see a floor-vote on its proposal.
Although no final decisions have been made yet, House Speaker Thomas P. O'Neill (D-Mass.) and other leaders were reported seriously considering denying the administration a chance to offer its amendment when the tax bill reaches the House floor.
If the leadership does decide against the White House, it effectively would mean House passage intact of the $16 billion tax cut bill approved last week by the House Ways and Means Committee - including a big cut in capital gains taxes that Carter opposes.
The House Rules Committee is scheduled to meet this morning to decide the parliamentary procedures that would determine which floor amendments will be permitted. Although the voting sometimes is close, the panel is heavily influenced by the leadership.
A decision not to allow the White-House - backed amendment would mark a serious political blow for the administration. Top Carter officials made a major show of supporting the proposal last week, apparently believing that O'Neill was behind them.
Yesterday, however, O'Neill, obviously pigued by the White House performance, told reporters: "What is the administration proposal? I don't know what it is. Does anybody know what it is?" He then began a series of meetings to work out a position.
It was not immediately clear what O'Neill would suggest if he decided against supporting the administration's proposal. However, some sources said he was leaning toward allowing two earlier liberal-backed amendments that are almost certain to be defeated.
O'Neill also said to be opposed to be liberal-backed demand for a separate floor vote on a proposal by Rep. Richard Gephardt (D-Mo.) to provide a 5 per cent tax credit to help offset next year's scheduled increases in Social Security payroll taxes.
And House leaders were reported toying with the idea of granting a Ways and Means Committee request to allow a separate vote on a GOP - sponsored Roth-Kemp tax-reduction plan - but only on an obsolete version that includes a companion cut in corperate taxes.
There was considerable speculation that the leadership's strategy might jeopardize passage of the tax bill in any form. Rejection of the Social Security and Roth-Kemp proposals would be likely to anger liberals and Republicans, those support is critical to enactment.
However, O'Neill was reported to be annoyed at what some sources said was the failure of the administration to keep him fully apprised of developments involving its own proposal. Top Carter officials apparently conferred with O'Neill only on an early version of their plan.
The amendment supported by the administration would alter the Ways and Means Committee measure in two ways:
It would shift some more of the tax cuts for individuals to taxpayers at the lower end of the income scale, leaving less for those at the upper end.
It would trim back the reductions in capital gains taxes the committee bill provides for a small group of taxpayers with large amounts of tax-sheltered income.
The proposals O'Neill apparently is considering allowing as floor amendments instead are the original substitutes sponsored by Reps. James C. Corman (D-Calif.) and Joseph L. Fisher (D-Va.). The two since have scrapped their plans to back the administration bill.
The early Corman proposal would skew the tax rate reductions for individuals largely toward low and middle-income groups, but would knock out all the committee's proposed capital gains cuts except for modest relief for homesellers.
The Fisher proposal would shift tax rates for individuals more modestly, but allow more capital gains cuts. It also would include the Gephardt Social Security plan.
The developments came as, separately, the congressional Joint Committee on Taxation published new tables showing the impact of the capital gains tax-cut proposals in the House Ways and Means Committee bill.
The breakdown showed, as expected, that the panel's decision to eliminate the present 15 per cent "minimum tax" on capital gains and substitute a weaker alternative tax would primarily benefit taxpayers in the $50,000-and-over brackets.
However, two other capital gains related measures would spread some of the benefits down as low as $20,000-and-up brackets:
A proposal to exempt from capital gains taxes the first $100,000 in profits from the sale of a home would benefit mainly those taxpayers in the $20,000 to $50,000 brackets.
And a plan by Rep. William Archer (R-Tex.) to provide for the first time an "inflation adjustment" for capital gains taxes would spread the tax breaks evenly for all taxpayers earning $20,000 and above.
In case of all three proposals, however, the proportion of benefits going to taxpayers earning $20,000 and below would be minuscule.
A capital gain is the profit from the sale of stocks or other assets. Under present law, only half a capital gain is subject to federal income tax. The rest sometimes is subject to a 15 per cent "minimum" tax.