The House Ways and Means Committee voted yesterday to perpetuate a multimillion-dollar escape clause for independent oilmen that shelters their income from even a 15 per cent "minimum tax."
Proposed by President Carter as part of his energy package, the controversial measure was adopted handily on a roll-call vote of 24 to 13.
Rep. Barber B. Conable Jr. (R-N.Y.), the ranking GOP member of the committee, described the measure as simply "one of the production incentives in the bill" and said he thought it "a pretty modest one."
The action yesterday would permanently reverse a section of the 1976 Tax Reform Act that would have subjected most "intangible drilling costs" incurred by individual independent oilmen to a 15 per cent minimum tax. This would cost them an estimated $32 million in fiscal 1979 and as much as $74 million by 1985.
The oilmen began lobbying against the new rule almost immediately after it was adopted and, following a March 8 visit to the White House, won Carter's support despite his campaign talk about the need to eliminate "hundreds of tax breaks."
Intangible drilling and development costs cover a wide range of expenses in digging oil and gas wells, from labor to cleaning expenses to some forms of transportation.Proponents of tax revision have charged that the liberal writeoffs helped many independent oilmen shelter their income from vitually any taxes prior to the passage of the 1976 tax reform law.
Congress initially suspended imposition of the minimum tax rule on such writeoffs earlier this year in the 1977 Tax Reduction and Simplification Act.
Protesting against permanent extension of the tax break, Rep. Charles A. Vanik (D-Ohio) charged that the real issue is whether to impose a minimum tax on "some of the wealthiest people of America."
"For the first time," he said of last year's tax return law, "we reached out and touched them just a little." In response, he said, "they flew here in their private jets and cluttered the airport" in lobbying for repeal.
Rep. Joe D. Waggoner Jr. (D-La.), however, denounced the minimum tax rule as an unjustifiable "tax on expenditures" rather than on income. He voiced resentment of what he described as an emotional atmosphere in this country that had made "whipping boys out of the people who have produced low-cost energy for the people of America, the people in the oil and gas industry."
Rep. Bill Archer, a Houston Republican, then sought to depict Ralph Nader's tax reform and research group as the bad guys in the fight in connection with a broadside they had distributed to every member of the committee on Monday.
In the four-page letter, which included an attachment detailing anonymous examples of millionaire oilmen who paid little or no regular income taxes, tax revision lobbyists Robert M. Brandon and William Pietz charged that the minimum tax exemption for the oilmen was "the most strikingly ill-advised provision of the entire energy package." In 1974, they said, "The House Ways and Means Committee actually saw tax returns of oilmen with incomes in excess of $1 million who paid no federal income tax."
Rep. James C. Corman (D-Calif.), an opponent of the tax break, subsequently took one of the tax lobbying group's 1974 examples, had it retyped as though it were an up-to-date sample, and had it distributed to each and unattributed to himself or any group.
Archer had a heyday, saying he was disturbed by "some of the inflammatory information being passed around here" and calling it "totally false" as an example of the taxes that would be due under current laws governing oil depletion allowances (which independent oilmen also still enjoy to the tune of $500 million a year). Archer demanded to know where the sheet came from.
"It was on a thing from (Nader's) Public Citizen," Corman responded in lame tones.
In other actions yesterday, the committee:
Approved a 10 per cent depletion allowance for geysers and other wells drilled to tap geothermal energy, in addition to voting for an administration proposal that would allow intangible drilling cost deductions for such undertakings - but only after adopting an amendment offered by Rep. Sam M. Gibbons (D-Fla.) that would limit the combined deductions over the years to the amount of money invested in the enterprise. The estimated loss to the Treasury would be around $5 million in fiscal 1978 and $54 million or somewhat less in 1985.
Tossed some tinsel to the recycling industry with an amendment from Conable that will provide a total investment tax credit of20 per cent for the purchase of recycling equipment that is used to sort and prepare solid wastes - such as aluminum, paper, rubber, zinc and copper - for recycling. This will cost the Treasury an estimated $20 million a year.
Nearing the end of the their first round of preliminary votes on the energy package, both Democratic and Republican members of the Ways and Means Committee began the day at a White House breakfast meeting with President Carter.
Members said that Carter, who only two weeks ago charged that special interests were dominating the committee's decisions, expressed satisfaction with the votes since then and praised them for their labors.
"It was the other side of the blast at the Ways and Means Committee." Rep. Otis G. Pike (D-N.Y.) told reporters."He told us what a good job we were doing."
Rep Charles B. Rangel (D-N.Y.) said he cautioned the President, however, that "it's a very thin thread that holds us all together" on the energy package. He told a reporter it might lose a few supporters, including him, unless some adjustments are made to satisfy various regional interests who want some of the proceeds from Carter's crude oil equalization tax.
Meanwhile, a House Commerce subcommittee handling most nontax parts of the President's energy package defeated several restrictive Republican amendments as it began consideration of provisions giving the government broad powers to force industry and utilities to shift from gas and oil to coal. This would supplement the tax and rebate provisions approved by the Ways and Means Committee to encourage conversion.
One amendment, rejected 13 to 9, would have exempted boilers whose fuel consumption is less than 300 million British thermal units per hour. The administration said this would have meant a loss of energy savings equal to 500,000 barrels of oil a day.