The Senate Finance Committee wrapped up five days of hearings on the House-passed version of tax overhaul yesterday with almost all the economists who testified over two weeks agreeing that reducing the deficit is more important than rewriting the tax code.
"I would put changes in the tax structure down very low," former Council of Economic Advisers chairman Martin S. Feldstein said yesterday, joining eight other economic experts who oppose the House tax plan. Four economists spoke in favor of the House measure.
Like most of the other economists who testified before the committee, Feldstein said the House tax bill would slow economic growth and make U.S. exports more expensive. The measure would transfer about $140 billion in taxes now paid by individuals to business over five years by cutting tax rates for people and curtailing corporate tax breaks.
The economists "have given us great concern about the capital-formation aspects," said Sen. John H. Chafee (R-R.I.). "It's just reinforced the view that all pales to getting the deficit down."
"I think it means that no bill gets out of the Senate without major changes from the House bill or the administration's bill," said Sen. Lloyd Bentsen (D-Tex.).
Yesterday's hearings were the last scheduled for the full committee. A subcommittee will hear testimony at the end of the month on legislation to impose an oil import fee, and other Senate committees are holding hearings, featuring testimony generally hostile to the House bill.
During the next few weeks, Finance Committee Chairman Bob Packwood (R-Ore.) hopes to draft a proposal that can gain the support of a majority of committee members before formal bill-writing begins. He recently concluded a round of meetings to solicit committee members' opinions.
Daily sessions with committee staff members and aides to the senators on the Finance panel have produced few concrete results. According to some who attended the meetings, most of the time has been spent getting committee members' positions on a host of options. "Show and tell," one aide called it.
But Packwood and his staff have mentioned some of the ways they hope to raise the $100 billion to $130 billion in revenue that will be needed over a five-year period to pay for restoring the tax benefits supported by committee members or by President Reagan.
There is strong sentiment on the committee to strengthen business tax breaks for investment. Reagan also is pushing for a top personal tax rate of 35 percent; the House bill has a top rate of 38 percent, and the current top rate is 50 percent. He also wants to increase the personal exemption from its current level of $1,040 to $2,000 for low- and middle-income taxpayers.
The draft bill may include a proposal to end the tax deduction for state and local sales taxes, Packwood has said. Another possibility is a limit on deductions for interest paid by businesses and by consumers for loans other than home mortgages.