The House-passed $16.3 billion in tax reductions came under fire from both flanks yesterday - business saying it doesn't cut deep enough, and a spokesman for a consumer-group complaining it cuts in the wrong places.
As in previous testimony this week at Senate Finance Committee hearings, much of the contention centered on the House bills provision to reduce the capital gains tax from 49 percent to 35.
General Electric Chairman Reginald H. Jones, testifying yesterday as chairman of the Business Roundtable's Task Force on Taxation, said the Capital gains levy should be reduced even further, and that overall tax reductions totaling $25 billion are needed quickly to bail out the economy.
But Robert M. Brandon, of Ralph Nader's public Citizen's Tax Reform Research Group, told the committee the capital gains tax cut should be dropped, and the entire tax package revised give lower income people an escape route from inflation.
Jones said the economy is in such bad shape "the situation could slip out of hand unless decisive action is taken to return the target to a tax cut approaching $25 billion, effective no later than Jan. 1."
And whereas the House bill would cut the corporate tax rate from 48 percent to 46, Jones urged it be reduced to 45 percent immediately "and at least one point further . . . for each subsequent year until the rate reaches 42 percent."
Unless the Congress enacts prompt and sizeable tax reductions effective on Jan. 1, 1979," Jones said, "next year will see about $25 billion in tax increases from inflation and legislation already on the books.
"That includes increased payroll taxes, escalation by inflation of individuals into higher tax brackets, and higher corporate taxes due to the effects of underappreciation as well as taxes on phantom inventory profits."
Capital gains taxes "could safely be further liberalized, consistent with revenue considerations, to provide a more favorable climate for capital formation," Jones said.
Brandon, however, said "the capital gains tax reductions in the House bill should be scrapped."
And he said, "overall tax cuts should be restructured to give greater relief to taxpayers making under $50,000 and especially to those in the under $15,000 income class, where inflation has eaten away at the ability to purchase even necessities."
Brandon said the House bill "provides real reductions for only a few, high income individuals and actually makes the tax system substantially less fair."
Brandon, said the new increases in Social Security payroll taxes and the House-passed income tax reduction bill would result in a net increase of 0.7 percent in the effective rate of tax paid by persons earning under $10,000 a year.
Those in the $10,000 - $20,000 income class would face an effective tax increase of 0.2 percent in 1979; $20,000 - $30,000, an increase of 0.9 percent $30,000-$50,000, an increase of .6 percent, he said.
Couples and individuals with incomes of $50,00 to $100,000 would break even under the House bill, Brandon said. Those at the $100,000-$200,000 level would get a 0.2 percent tax cut while those making $200,000 and over would get a tax reduction of 1.5 percent, he added.
Without any tax cut, he said, inflation and the higher Social Security tax would yield a 0.9 percent increase in effective taxes for persons earning less than $10,000 a year; a 1.9 percent increase for those in the $20,000-$30,000 group and a 0.4 percent increase for those with income above $200,000.
Brandon's anaylsis of the House bill appears to match that of the Carter administration, which has urged the Senate to tilt the tax reductions more toward those with incomes under $50,000 a year.