Senate Democrats rallied behind President Carter yesterday and crushed a Republican plan for a permanent income tax cut, 59 to 40.
The amendment to the tax bill, sponsored by Sens. John C. Danforth (R-Mo.) and Jacob K. Javits (R-N.Y.), was viewed by Republicans as their major alternative to Carter's tax proposals. For that reason, Democrats, including some who feel that more economic stimulus is needed than Carter has requested, massed against the amendment to thwart a potentially humiliating defeat for the President.
On 61 Democrats who voted, 56 backed the President, a sufficient number to kill the amendment even if three Republicans hadn't also voted against it.
The five Democrats who voted for the amendment and against the President were Joe Biden Jr. (Del.), John A. Durkin (N.H.), Thomas J. McIntyre (N.H.), William Proxmire (Wis.) and Donald W. Reigle Jr. (Mich). The President to kill the amendment were Mark O. Hatfield (Ore.), William L. Scotd (Va.), and Milton R. Young (N.D.).
Republicans for their part showed great cohesiveness for the amendment, losing only three of 38 who voted from their party. Javits and Danforth said the tax cut would stimulate production, produce 350,000 new jobs by the end of 1978 and prevent an economic downturn next year.
Senate Finance Committee Chairman Russell B. Long (D-La.) warned that the House would never accept the Danforth-Javits permanent cut, adding, "If it did reach the President's desk he would not be overridden. There's not a chance on earth it would be overridden."
Under these conditions, Long said. the only purpose of the amendment he could see would be to allow the Republicans to "point the finger" at Democrates for killing a popular income-tax-rate cut.
The GOP amendment would have reduced rates from 4 to 14 per cent on the first $20,000 of taxabic income.
Carter, APril 15, said flatly he would veto the bill if the GOP tax cut were added because the tax reduction is "not necessary" to stimulate the economy, would be "permanently inflationary," and would undermine his proposed comprehensive tax reform package scheduled for presentation in the fall.
Senate Majority Leader Robert C. Byrd (D-W.Va) said he would bring the Senate in early each day and keep it late the rest of this week in the hope(Sww TAX, A4, Col.3)(TAX, From A1)of finishing the bill and sending it to conference as soon as possible.
Even without the permanent GOP tax cut, other provisions in the bill would reduce taxes for individuals and businesses by about $3 billion in fiscal 1978 and about $15 to $16 billion in fiscal 1979. The House had already passed a measure with most of the same provisions.
Virtually the entire debate over the Danforth-Javitts amendment was on how much stimulus the economy needs now and next year. Carter, in his initial tax proposals, had called for ablut $28 billion in tax reductions over fiscal 1977 and 1978 to spur the lagging economt. Included was a oneshot, $50-per-person tax rebate, for taxes paid in 1976. That would have put $10.4 billion into the economy in the next few months.
However, citing signs of economic improvement and inflationary pressures, he withdrew the call for the $50 rebate two weeks ago and the Committee decided yesterday that the Senate stripped it from the bill.
Meanwhile, the Senate Budget administration was wrong to drop the rebate, and said that Congress should provide $7.3 billion in tax cuts to keep the recovery on track.
Chairman Edmund S. Muskie (D-Maine) said dropping the rebate was wrong because economic conditions do not warrant changing federal spending policies. THe House, however, in floor action Tuesday eliminated the rebate impact from its fiscal 1977 budget.
Senate Republicans, with the support of some Democrats, said some other form of stimulus that would wouk better than a rebate is still needed. Javits and Danforth said their amendment would put $2.2 billion in fiscal 1977 and $10.2 billion in fiscal 1978 into the economy by reducing tzxes for a family of four by $36 for those in the lower income brackets to $220 for a family with taxable income upwards of $20,000 a year.
They said the bulk of the stimulus wouldn't come now but next fiscal year to avert a predicted downturn. Danforth said 75 per cent of the benefits would ago to those under $20,000 taxable income, adding that many families are now paying higher taxes--although their real incomes haven't gone up--simply because wage increase caused by high inflationrates pushes them into higher tax brackets.