The Carter administration is expected to ask the Senate today to make significant changes in the tax bill passed by the House last week, including revamping the reduction in capital gains taxes to spread more benefits to investors who earn less that $100,000.
Treasury Secretary W. Michael Blumenthal is scheduled to appear before the Senate Finance Committee this morning to lay down the administration's new position. Sources said Blumenthal would offer some specific proposals for changing key portions of the bill.
Although officials declined to specify yesterday what changes the administration might seek, sources said Blumenthal would seek to skew more of the tax reductions for individuals toward taxpayers at the lower end of the income scale.
He also is considered likely to ask the Senate to scrap some key provisions in the House-passed bill. Among others, these include a GOP plan to provide for the first time an "inflation adjustment" for capital gains taxes, and a new graduated income tax for small business.
The House passed a $16.3 billion tax bill July 10, overriding a list-ditch effort by the White House to push through a compromise proposal. The administration also lost a vote on the House floor in which liberals tried to scuttle the proposal for an inflation adjustment.
Sen.Russell B.Long (D-La.), the Finance Committee's chairman, has proposed reviving a Kennedy administration proposal for cutting capital gains taxes that would spread the benefits of such a reduction beyond the $100,000-and-up income brackets favored by the House bill.
However, it was not known yesterday whether Blumenthal would embrace that plan today. The Treasury previously has opposed any reduction in capital gains taxes, which are imposed on the profits from the sale of stocks or other property.
Carter is seeking a tax cut of $19.4 billion, but without any reductions in capital gains taxes and with tax cuts for individuals skewed more toward lower-middle and middle-income tax-payers. The president also has proposed some "tax reforms."
The Finance Committee generally has been expected to enlarge the size of the House-passed tax-cut and to increase the tax reduction for capital gains. Long said in interviews late last week the panel may boost the package to about $20 billion or higher.
Blumenthal continued to work late yesterday on the outline of the position he would take before the committee this morning. Aides said the secretary has been so preoccupied with the flurry over the dollar in recent days that he has not been able to devote full time to tax issues.
The administration's posture this week and next is expected to signal formal abandoment of the tax-cut plan Carter proposed in January. While officials said they may try to push through a few more "reforms." they are unlikely to seek a full return to the January proposals.
Carter said at one point he would veto any measure that included a reduction in capital gains taxes. But aides since have said the president will wait and see what the Senate does on the issue before making up his mind.
Capital gains are the profits from the sale of stocks or other assets. Under present law, only half a capital gain is subject to the regular income tax. The remainder often is taxed at a 15 percent rate under the "minimum tax," which was enacted in 1969 to prevent tax-avoidance.