House tax negotiators yesterday presented their Senate counterparts with a proposed compromise tax-increase bill that retains many controversial business tax hikes opposed by the Reagan administration.
The offer retained, in modified form, a number of provisions that restrict tax advantages for mergers and takeovers. According to many Wall Street analysts, the original provisions would have sharply limited such transactions and the approval of the provisions by the House Ways and Means Committee two months ago helped trigger the stock market's collapse Oct. 19.
Congressional tax writers have denied the assertion, saying the provisions were not significant enough to explain the more than 500-point drop in the Dow Jones industrial average that day, especially because they were only part of a committee bill and had not been passed by either house.
Senators rejected most of the House proposals almost immediately, and expressed concern that the House's opening position indicated negotiations could last for days. Of the takeover provisions, senators accepted one that would penalize stock gains resulting from hostile takeover attempts and accepted a limited version of another.
Yesterday's House offer and Senate response were part of the maneuvering in a day filled with back-room meetings aimed at implementing a $30.2 billion deficit-reduction package. More than 200 members of Congress are attempting to reconcile two large deficit-reduction bills before Christmas.
In one of those efforts, 13 subcommittees met throughout the day to craft a compromise $600 billion spending bill, but a final resolution was not expected until tonight or Thursday.
The House offer was made as part of a separate package of spending cuts, asset sales and tax increases that together are aimed at cutting the 1988 deficit by at least $23 billion. The tax portion of that measure is to total $9 billion, in compliance with the deficit-reduction agreement reached with the administration last month.
The House offer also included provisions of the original House bill that would place new deduction limits on interest on home equity loans exceeding $100,000 and on first mortgages of more than $1 million. It would also repeal an accounting technique that allows defense and construction contractors to delay paying taxes on some of the profits from long-term contracts and would place a minimum tax on a greater portion of a company's profits as reported to shareholders than current law imposes. The offer only covered a portion of the $9 billion in revenue the tax bill must raise.
Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) said, "I think we have a long way to go. I had hoped for more major concessions than I saw. There are considerable differences."
Legislators are trying to finish work by Friday, but House Appropriations Committee Chairman Jamie L. Whitten (D-Miss.) said Congress would probably have to pass a two-day extension of its spending ceiling, scheduled to expire today, thus allowing the government to function until Monday.
The House offer did alter some of the takeover provisions of its original bill. For instance, it would disallow the deduction of 25 percent of the interest exceeding $5 million where the loan proceeds are used to pay for a corporate acquisition, rather than all the interest. The minimum tax provision was weakened somewhat, but the offer included, intact, a provision imposing a 50 percent excise tax on "greenmail" -- stock gains for persons who bought the stock with the announced intention of taking over the company.
The Senate accepted the greenmail provision, but rejected the debt limit proposals, repeal of the contractors' tax benefit, the $1 million mortgage limit and the minimum tax provision. Negotiators adopted the $100,000 limit on home equity loans, with modifications. Washington Post staff writer Tom Kenworthy contributed to this report.