The Senate yesterday approved a bill that would cut personal and business taxes by $23.6 billion over the next two years. The vote was 73 to 7.
The legislation, the centerpiece of President Carter's plans to stimulate the economy by creating new jobs and slashing taxes, now goes to conference with the House, which passed its own version with the most of the same provisions.
Senate Finance Committee Chairman Russell B Long (D-La), the bill's floor manager, said after the vote, "This bill is a major tax-reduction bill. For the average family of four which will use the standard deduction, this bill amounts to cut more than $170 this year."
Just before passage, the Senate voted 64 to 17 to add an amendment by Sen. Edmund S Muskie (D-Maine) extending the countercyclical revenue-sharing program one year to Sept. 30, 1978. The amendment would raise the current $1.25 billion for the program ceiling to $2.25 billion for the remainder of this year and would provide a $2.25 billion ceiling for fiscal 1978.
Sen. Carl T. Curtis (R-Neb.) hinted that the Muskie proposal was being tacked onto the box measure in order to bypass the House Government Operations Committee, where there is opposition. But Treasury spokesmen said the President simply wants extension of the program as soon as possible, and the tax bill seemed a good vehicle.
For the individual taxpayer, the most important provision in the bill would set the standard deduction - for those who don't itemize deductions on their tax form - at $2,200 for a single person and $3,200 for married couples and heads of households. This is a permanent provision.
For most individuals this would be a bigger deduction than now. A family of four with adjusted gross income of $8,000 would save $174 in taxes, one with $12,000 would save $213. However, for about 1.7 million single taxpayers with incomes over $13,750, the new deduction figures would mean increases in taxes averaging $50, because in some cases under existing law they can get a deduction of up to $2,400. Another major provision simplifies tax computations, combining standard deductions, personal exemptions and the $35 general tax credit into a single tax table - allowing 96 per cent of taxpayers to figure taxes with a single use of the table.
President Carter originally asked $29.7 billion in cuts over fiscal years 1977 and 1978 to stimulate the economy, including a one-shot $50-per-person rebate, and $29.7 billion is what the House voted earlier this year. However, two weeks ago, Carter said the economy is doing better than expected and asked that the $50-per-person rebate proposal plus an investment tax credit for business and a jobs credit for business be dropped.
If carried out, these revisions would have cut the bill to $16.1 billion, but the Senate, while dropping the $50 credit, kept the business credits and added the other provisions bringing its bill to $23.6 billion ($3.4 billion in fiscal 1977 and $20.2 billion in 1978). The revenue-sharing authorizations are in addition to these figures.
Other major provisions:
Increase the investment tax credit on a business' new investments from 10 to 12 per cent for 1977 to 1980.
Allow a firm in 1977-78, instead of taking the 2 per cent increase in the investment tax credit, to take a "jobs" credit of up to $2,100 a year for each person it adds to its work force after allowing for a "normal" 3 per cent growth in the work force. If the firm is in a state with 7.5 per cent or more unemployment, it could get the credit for new workers hired after allowing for only a 1 per cent normal work-force growth. There would be an extra 10 per cent bonus if the extra workers are handicapped, welfare clients, long-term unemployed or Korea or Vietnam veterans. No firm could get credits under these provisions exceeding $100,000 a year.
Extend for one year, through 1978, the general $35-per-person general tax credit; the government payment equal to 10 per cent of wages for low-income (under $4,000 annually) workers with dependent children and the corporate tax rate reductions voted in 1976.
Allow a $250 tax credit for care of an aged parent in the home.
Repeal the 15 per cent minimum tax on deductions for intangible drilling costs for independent oil and gas operators, except to the extent that deductions exceed related oil and gas income, effectiveJan. 1, 1977.