AFL-CIO President Lane Kirkland and other labor leaders criticized President Reagan's tax revision plan yesterday, saying it curtails tax benefits for the middle class and retains those for high-income earners.
While the union heads praised the concept of overhauling the tax code, they were almost unanimous in blasting the Reagan plan for partially taxing employer-paid health insurance premiums, repealing the deduction for state and local taxes, and taxing unemployment benefits while retaining the tax credit for doing business abroad and the preferentially low tax rate for capital gains.
"In our view, the key test of a tax-reform proposal is the extent to which it diminishes unfairness toward people who work for their money and eliminates favoritism toward people whose money works for them," Kirkland told the House Ways and Means Committee. "By that test, much of the president's program falls short."
He and other leaders gave passing praise to provisions of the tax plan that would help those in poverty, such as raising the standard deduction, although they barely mentioned the lower tax rates of 15 percent, 25 percent and 35 percent that also are part of the package.
They emphatically rejected a provision that would tax the first $10 per month of employer-paid health premiums for single taxpayers and the first $25 for a family.
The proposal is a change from the Treasury Department's original tax plan, which would have taxed all health premiums above $70 per month for singles and $175 for a family. It was thought the alteration was made to appease labor, and Tuesday, Senate Finance Committee Chairman Bob Packwood (R-Ore.) called the change a "carefully worked-out compromise" involving himself, the administration and organized labor.
But yesterday, organized labor would have nothing to do with it. Besides Kirkland, United Auto Workers legislative director Dick Warden said, "these two proposals are equally bad," and urged Congress to reject any taxation of health care benefits.
Paul R. Locigno, director of government affairs for the International Brotherhood of Teamsters, said, "Taxing fringe benefits would dismantle the economic safety net provided to our workers."
Members of the Senate Finance Committee provided another view of fringe-benefit taxation yesterday, however. Sen. John H. Chafee (R-R.I.) asked Internal Revenue Service Commissioner Roscoe L. Egger Jr. why it was fair to tax the first dollar of benefits every family receives, as the current plan would do, so that those with minimal health plans were taxed on as much income as those with more extensive benefits.
Egger responded that the administration probably would have preferred the original "cap," but "the perception is that Congress as a whole would prefer to go the other way."
Union leaders were nearly unanimous in opposing the end of the state-and-local deduction before the Ways and Means panel, saying it would lead to higher taxes on middle-income earners and force states and municipalities to curtail needed services.
But they split on another element of the Reagan plan: restrictions on the deductibility of business meals. Kirkland said the AFL-CIO agreed with the limitation. Locigno of the Teamsters, on the other hand, said his union "strongly opposed" the change. And Robert E. Juliano, legislative consultant to the Hotel Employees and Restaurant Employees International Union, said it would cost jobs.
"We find it sadly ironic that the one area in particular in the president's proposal that would cause a job loss is one that the AFL-CIO chooses to support," Juliano told the hearing.
Egger encountered skepticism at the Senate Finance hearing over whether lower tax rates would cause taxpayers to get out of tax shelters, with several senators pointing out that use of shelters appeared to be on the rise in recent years despite large cuts in marginal tax rates. Egger responded that he believed evidence would show that use of illegal and questionable shelters was on the decline.
The commissioner also came under fire for computer and human-error problems at the Philadelphia IRS center that have delayed refunds for thousands in the District and Maryland, among other areas.
When Egger said that most of the tax-reform plan could be implemented within a month of congressional and presidential approval, Sen. William V. Roth (R-Del.) exploded.
"We're told that in one month your service could implement a new tax law, and you can't even administer the old," Roth fumed.