President Carter's plan to grant a $50-per-person tax rebate ran into unexpectedly heavy opposition in Congress yesterday. Republicans said they didn't want to do it, and some Democrats said they wanted to do it differently.
The Senate Republican Conference, made up of all 38 senate Republicans, issued a plan of its own to stimulate the economy. It called for sizable "permanent" tax cuts rather than a one-time-only rebate, which it described as a "temporary gimmick."
In the House Ways and Means Committee, as hearings began on the Carter plan, ranking Republican Barber B. Conable Jr. (R-N.Y.) complained that the rebate was indiscriminate, and likened it to "shoveling money out of airplanes."
Conable said he would rather give tax cuts of a more conditional kind. One such proposal he favors is an employment tax credit or special tax cut for businesses that hire additional workers.
He also mused aloud about some how tying any tax cut to the size of a taxpayer's home heating bill, as a way of offsetting the effects of this year's low temperatures.
Still a third set of objections came from an assortment of Democrats on Ways and Means, including several of its six new Democratic members, who want to phase out the rebate above some still-to-be-determined income level, so that none of the rebate goes to the very rich.
Those who share this point of view include Reps. William M. Brodhead (D-Mich.), a fourth-termer new to Ways and Means this year, and Jim Guy Tucker (D-Ark.), a freshman who won the seat vacated by former Ways and Means Chairman Wilbur D. Mills (D-Ark.).
These amenders are thought more likely to succeed than those who want to kill the rebate. Most of those involved in the process think Congress will pass a rebate, though perhaps in amended form.
The Senate Republicans' tax proposals were the main item in a $26.2 billion plan announced yesterday to pump up the economy.The Ford administration had contended that the economy did not need much stimulus, and the Republican senators agreed that "additional . . . stimulus is not required in the near future to avoid a recession." But they said some might help anyway, "to assure significant and continued improvement in the unemployment rate."
Carter's plan is to stimulate the economy partly through the one-shot rebate, partly with an ongoing tax cut. One reason for not doing it all through a "permanent" cut is that he does not want to give away future revenues he may need for spending programs.
The Republicans, on the other hand, say that as a matter of philosophy they would rather cut taxes and see the spending programs shrink.
The basic cut they proposed involves lowering rates on about the first $13,000 of taxable income (which is generally equal to the first $18,000 of gross income, experts say). Everyone would gain from this, but in percentage terms the greater gains would come at lower income levels.
The Senate Republicans also proposed an employment tax credit of the same sort that Conable and Ways and Means Chairman Al Ullman (D-Ore.) have endorsed: a special home insulation credit, an increase from $100 to $600 in the amount of dividend income each individual may exclude from taxes, a new $100 exclusion of the same kind for interest income and a job training and placement program aimed at persons aged 14 to 24 who have been unemployed 26 weeks or longer.
The senators said their proposal would cost about $5 billion less than Carter's and produce more than 2 million new jobs.
The idea of phasing down the tax rebate for those in the highest income brackets is not a new one. In the anti-recession tax cut of 1975 Congress granted a rebate of 10 per cent of 1974 taxes (those that were due in April, 1975).
In the anti-recession tax cut of 1975 Congress granted a rebate of 10 per cent of 1974 taxes (those that were due in April, 1975).
But that 10 per cent was subject to a $100 minimum and $200 maximum - and the maximum phased back down to $100 as incomes rose from $20,000 to $30,000. Thus the rebate was $100 in low income brackets, edged up to $200 in the middle, then eased back down to $100 for those in the upper regions. CAPTION: Picture, Office of Management and Budget Director Bert Lance, Treasury Secretary W. Michael Blumenthal and House Ways and Means Committee Chairman Al Ullman before hearings on the Carter plan for a $50-per-person tax rebate. By James K.W. Atherton - The Washington Post