Senate Finance Committee members said yesterday they have serious problems with the business-depreciation portion of the tax plan proposed by their chairman, Bob Packwood (R-Ore.).
Treasury Secretary James A. Baker III said the administration also would like changes that would reduce the cost of investment.
The committee took no votes yesterday, and is not expected to make any formal decisions today when members consider accounting changes. But several senators said yesterday they will offer broad-scale amendments when depreciation comes up for votes later in the tax-writing process. Some of the amendments apparently would bring in less tax revenue than the Packwood plan.
"Unless we can work out an appropriate compromise, I intend to join with Sen. William V. Roth (R-Del.) and others in offering an alternative system," said Sen. John Heinz (R-Pa.).
Baker said the proposal, which is more beneficial to most kinds of investment than the depreciation plan in the House-passed tax bill, and in a few cases more generous than current law, satisfied President Reagan's guidelines for tax revision. But he said the administration would like additional changes reducing taxes on new investments.
According to figures released yesterday, Packwood's depreciation plan would raise $20.5 billion in new revenue over five years, while the House bill's depreciation provisions would raise $41.1 billion, and President Reagan's plan would raise $20.3 billion. A Packwood proposal to let small companies deduct in one year their first $50,000 in expenditures would cost his plan an additional $23.9 billion.
Depreciation, a decrease in value of property through wear or obsolescence that companies deduct from their income, long has attracted interest on the tax-writing committees in Congress. It affects most U.S. companies. The decision to permit the cost of a piece of equipment, say, to be written off over three years rather than five, can have a favorable effect on a firm's finances.
Sen. Russell B. Long (D-La.) and others objected to Packwood's proposal to move automobiles and light trucks from a three-year write-off period to a five-year period. Sen. David L. Boren (D-Okla.) thought oil refineries should be depreciated over five years, not 10 years as Packwood proposed.
Sen. Lloyd Bentsen (D-Tex.) said he supported extending the write-off period for commercial buildings from the current 19 years to 30 years, with no lumping of the benefits in the early years.
Packwood took note of those and other comments, but pointed out that the legislation will have to raise taxes on some industries to make up for restoring tax benefits to others. Otherwise, the legislation could bring in less revenue than the existing tax system.
"If we want a revenue-neutral bill, we've got to weigh what we want to loosen and what we want to tighten," Packwood said. "If it's loosen, loosen, loosen all the way, I can see disaster on the last day."
He urged senators to get their amendments in shape quickly, so they can offer them when depreciation again is discussed.
On Monday, the panel went over the changes proposed for natural resources, and afterward, aides said a few amendments were expected but the proposals could be considered provisionally approved. In depreciation, where Packwood is proposing more changes in the current system, the eventual outcome of his proposal is less clear.
"This is a situation of maximum fluidity," said Sen. Bill Bradley (D-N.J.), adding that he may have an amendment to restrict current depreciation benefits.
Separately, Long, who was chairman of the Finance Committee, and other senators said they will offer an amendment to the tax bill on the Senate floor to exclude all interest from tax-exempt bonds from the proposed minimum tax in the plan.