Rep. Al Ullman (D-Ore.) said yesterday he would support a "value-added" tax similar to that proposed by Sen. Russell B. Long (D-La.), and pledged to work "closely" with Long next session to "see what can be developed."
Ullman, chairman of the House Ways and Means Committee, asserted that "there is much to be gained" from using the European-style tax to finance a portion of the Social Security system, as Long suggested last week.
However, he insisted, any such tax would have to be "low-level," and not a "retail federal sales tax." He pointed to a so-called "transactions tax" now in effect in Michigan as a model for his own proposal.
Ullman's prompt expression of support for the notion appeared to heighten earlier prospects that a value-added tax may be considered this session. Long, the other major backer, is chairman of the Senate Finance Committee.
However, it still wasn't clear whether the proposal would get much beyond the exploratory stage in the coming session of Congress. Long's stall aides have said he isn't planning formal hearings, and Ullman has no specific plan.
Ullman's insistence that any value-added tax be kept "low" appeared to ruleout any major shift in social security financing. To replace the present payroll tax entirely would require a VAT of 13 per cent or so.
However, the House chairman's prohibitions against any form of "retail federal sales tax" appeared to be largely a matter of semantics. A value-added tax is a complex form of national sales tax, levied in states as a product is made.
The tax ultimately is passed onto the consumer.
Ullman, in his speech yesterday reiterated points he has made previously about the committee's likely schedule next session, and repeated earlier pleas to the Carter administration to send its "wage-insurance" plan up early.
Carter administration officials brought an early draft of the wage insurance plan to committee members earlier this week, but were given a lukewarm reception. The White House plans to unveil the plan formally in January.
The Michigan tax was instituted several years ago after industry objected to high corporate income taxes. The plan, generally considered to be well crafted, has drawn plaudits from fiscal officers.
Ullman said if Congress does adopt a value-added tax to help finance Social Security benefits, it should offset this be reducing regular payroll taxes. He declined, however, to endorse us eing aVAT to replace income taxes as well.
Along with the finacing mechanism. Ullman said the panel would consider other changes in the Social Security system such as tightening benefits and broadening coverage to include federal employes.
He also reiterated his opposition to indexing, that is, automatically adjusting the tax system to offset the impact of inflation in pushing taxpayers into higher brackets. Congress defeated an indexing plan this past year.
Ullman also listed these areas the panel is likely to take up next session:
Fringe benefits-redefining rules and regulations on tax benefits-redefining rules and regulations on tax benefits allowed to taxpayers classified as independent contractors. The Carter administration has sought a crackdown on "loopholes" allowed this group.
A new look at proposals to impose capital gains taxes at death. Congress voted this past session to shelve a provision in the 1976 Tax Reform Act that would have raised taxes on profits from the sale by heirs of inherited assets.
A series of proposals to provide incentives for capital formation, particularly the issue of how rapidly businesses should be able to depreciate machinery and equipment. Many economists have urged relaxing current rules.
Ullman repeated his earlier assertions that he sees no need for further general income-tax reductions next year.