Congress' two tax-writing committees began considering new tax measures yesterday to meet congressional budget-balancing requirements -- but without President Carter's proposal for withholding taxes on interest and dividends.
In initial drafting sessions, the House Ways and Means Committee and the Senate Finance Committee ignored Carter's withholding plan and a spate of other presidential proposals -- including tightening the foreign tax credit.
Instead, the two panels came up with their own lists, containing far less politically painful proposals -- ranging from a delay of a further reduction in the telephone excise tax to a new tax to cover oil-spill clean-up costs.
The two most controversial proposals, still not formally approved by either panel, are:
A Finance Committee plan to approve Carter's proposal for speeding up payment of estimated taxes by corporations and to require those paying the minimum tax to count it in computing their estimated taxes each year.
A Ways and Means Committee proposal -- already rejected in the House and Senate once -- to restrict the use of federally subsidized housing bonds to finance low-interest mortgages for middle-income homebuyers.
The only formal action on any of the proposals yesterday came when the Finance Committee tentatively approved a plan to tax the profits made by foreigners from land sales in the United States.
The panel also informally agreed to require workers whose employers pay their Social Security taxes for them to pay federal income taxes on the amount that the company foots, removing the advantage of this practice to the workers.
The committee had sent both provisions to the floor earlier this session, but the foreign-investment bill was side-tracked in conference and the employes' tax proposals was watered down on the Senate floor.
Under the newly approved congressional budget resolution, the two tax-writing panels have been ordered to draft tax measures that would raise $4.2 billion in new revenues for the Treasury.
Without those new tax levies, the ostensibly "balanced" budget that the two houses just approved would be in deficit by that amount, and the lawmakers presumably would have to make further spending cuts to eliminate the red ink.
In taking up their own lists of relatively painless proposals, the panels rejected several tougher provisions suggested by staff members, including requiring so-called "independent contractors" to pay withholding taxes.
With approval of the congressional leadership, Carter had suggested last March that Congress raise a portion of the new revenues by requiring banks and corporations to withhold taxes on interest and dividends that they pay.
Carter had billed the measure in part as a crackdown on tax evaders.
However, the lawmakers apparently rejected this as too controversial. The American Bankers Association had protested that the procedure would be too burdensome. Carter had estimated it would raise $3.4 billion.
The list being considered by the Finance Committee potentially would raise the full $4.2 billion required by the new budget resolution. Some $3.4 billion of this would come from corporations and the rest from individuals.
In yesterday's debate, however, the increases were opposed by the committee's Republicans, who argued that the tax hikes would hurt the economy and only worsen the current recession.
However, committee Chairman Russell B. Long (D-La.) argued that -- although Congress well may decide to cut taxes if the recession worsens -- the panel's obligation for now is to meet Congress' budget requirements.
Long also warned the committee it had better approve the proposal to tax corporate payments of employes' Social Security taxes before the device turns into a major "tax loophole."
The Finance Committee chairman said so many companies were starting to pay their employe's share of Social Security taxes as a move to help lower business costs that the revenue loss to the Treasury could soar to $6 billion. b
In approving the measure tentatively, the panel voted one exemption to the crackdown: It agreed to exempt state and local governments -- such as Texas -- that already are paying their employes' share of Social Security taxes.