The Senate agreed to a request from President Carter yesterday and stripped the $50-per-person rebate from the tax bill by voice vote.
Then a move was made on the floor to delete two special business tax credits which have substantial business community and Senate support but which the President also wants out of the bill.
The effort to kill the tax credits was led by Dale Bumpers (D-Ark.) and Edward M. Kennedy (D-Mass.). Kennedy said it would be unjustified to leave in the business credits while throwing out the $50 rebate for individuals.
Three months ago, President Carter asked for the tax rebate in order to pump $10.4 billion in quick purchasing power into the lagging economy over the next few months. But last week, he said the rebate should be abandoned because the economy is doing better than expected.
The Senate didn't reach a vote last night on the Bumpers-Kennedy proposal. Earlier in the day Republicans had made clear that they didn't want to take any more votes after the rebate was dropped, until they had time to study amendments of their own and to learn details of tax changes Carter proposes in his energy message tonight.
Yesterday morning, before floor debate, the Senate Finance Committee met on Carter's decision to drop the rebate. The President made the request after his advisers warned that it might be inflationary and after Senate vote-counters said that it might be defeated.
Sen. John C. Danforth (R-Mo.) challenged Treasury Department spokesman Emil Sunley to explain why the President had suddenly changed his mind. Although Danforth opposed the rebate, he favors another form of economic stimulus, a permanent reduction of income tax rates.
Sunley said it was a very difficult, close decision, but the economy in recent weeks had "rebounded considerably" from its gloomy status three months ago. The unemployment rate, 7.8 per cent in December, had dropped to 7.3 per cent and was expected to go down to 7 per cent by the end of the year "even without the rebate."
Sunley said industrial production had risen substantially, and housing starts for March were up 49 per cent over a year ago. At the same time, Sunley said, there were signs of increased inflation, with the wholesale price index rising at a 10.2 per cent annual rate for the first three months of the year. Under these conditions, he said, the President had decided that the immediate stimulus of a rebate wasn't needed. And, he said Carter favored considering the two business tax credits as part of an overall tax revision bill he plans to propose in September.
The Finance Committee quickly voted to drop the rebate and this was done on the floor later. But no one at the Finance Committee meeting made any move to drop the two business credits.
Meanwhile, Danforth kept insisting that no real floor debate should start until the administration had fully justified its new position.
One of the disputed business tax credits would increase the investment tax credit by 2 percentage points, to 12 per cent, until 1980. The second would permit a business, as an alternative to taking the increased investment credit, to take a tax credit of 25 per cent of the cost of hiring additional workers. The first option is designed to stir investment in added machinery in capital-intensive business; the second to encourage added hiring by labor-intensive businesses.
Other important provisions of the bill would increase the minimum standard decuction for taxpayers who don't itemize deductions to $2,200 for single persons and $3,200 for a couple or head of household; simplify tax computation: and extend for one year about $8 billion in individual and business tax cuts enacted in the last Congress. The administration wants these passed in the current legislation. CAPTION: Picture, Sens. Herman Talmadge, Abraham Ribicoff and Russell B. Long at Finance Committee session on $50 tax rebate. By James K.W. Atherton - The Washington Post