Members of the Senate Finance Committee voted overwhelmingly yesterday to retain current tax breaks for the oil, gas and timber industries, then postponed a crucial vote on business investment tax deductions when objections arose to a compromise package.
The votes on energy taxation came as no surprise, given the strong representation that energy and timber have on the Finance panel. But the delay on depreciation tax benefits put committee Chairman Bob Packwood (R-Ore.) behind the ambitious tax-writing schedule he had announced just the day before. Compounding the slowdown was the threat of a procedural dissent by Sen. Alfonse D'Amato (R-N.Y.), who is not a member of the committee. Such an objection could prevent the panel from taking afternoon votes during the next few weeks as it tries to produce a sweeping tax-revision bill by early May.
Finance aides said, however, that afternoons could be devoted to explanation of the Packwood tax-overhaul proposal, so that votes during the morning could take place rapidly.
The unsuccessful amendments in the natural-resources area, all proposed by Sen. Bill Bradley (D-N.J.), generally would have substituted the more restrictive provisions of the House-passed tax-revision bill for the portions of the Packwood plan dealing with oil, gas, timber and tax credits for energy conservation and alternative forms of energy.
He got no more than three votes on the 20-member committee for any of his four proposals. On two occasions Bradley was the only one voting for his amendment.
The depreciation compromise concerned the system by which companies deduct over a period of years the costs of vehicles, equipment and buildings. It is probably the single most important tax-code provision for business. Senators on the Finance Committee had been working for days to find an acceptable way of making Packwood's depreciation proposals treat certain investments more generously, without losing large amounts of federal tax revenue.
A package that had appeared to have the support of many Finance members, however, encountered rough sailing when details were released yesterday.
The plan would create a special category of "productive" assets that would get large deductions in the early years of their write-off periods. Some items on the list were included because they were considered important to the industrial sector.
In classic Washington style, however, other items important to the states of Finance Committee members somehow turned up on the list even if their relation to productivity was not clear, at least by the standards of senatorial critics.
"There is no definition of productivity except what state you came from and whether you were part of the group that put this thing together," said Sen. Daniel Patrick Moynihan (D-N.Y.).
Listed as productive, for example, was equipment related to oil drilling, timber production, textile manufacturing, printing and publishing, hog pens, production of athletic equipment and jewelry manufacturing.
While some senators complained the list was arbitrary, others felt Packwood hadn't included on it the items they suggested. Sen. Malcolm Wallop (R-Wyo.), a coauthor of the compromise package, for example, said he wanted to add interstate gas pipelines to the list. Other sponsors of the plan also said they would propose changes.
And senators pointed out that the package would lose perhaps $16 billion in revenue over five years, even though it included some tax-raising elements. One of those was a cutback in Packwood's cherished proposal to let small companies write off the first $50,000 in purchases each year, rather than depreciating them. It would be cut to $40,000 and targeted to active trades or businesses.
The list also raised broader objections on the committee to the notion that some kinds of investment deserve better tax treatment than others.
"What we're doing here is the very antithesis of the free market," said Sen. George Mitchell (D-Maine). "Here are 20 politicians defining what assets are productive and what are not. At least in the Soviet Union they use economists for that."
Just a few minutes later, Mitchell said he would propose an amendment to the depreciation package shortening real estate write-off periods, leading Wallop to point out the contradiction and say, "All of us fall into this hole, and the reason is that none of us is committed to tax reform." Then he said he would propose the pipeline amendment.