President Carter is considering a series of tax-revision recommendations this weekend that fall decidedly short of the "tax reform" promises he made during the 1976 presidential campaign.
Although Carter may well toughen them the proposals recommended by his Treasury Department advisers appear to dilute some key tax changes the President promised and fall short of some of his basic tax goals.
In the 1976 presidential campaign for example, candidate Carter said he planned to overhaul the tax system to eliminate existing inequities, spur investment and simplify preparation of tax returns.
Specifically, Carter pledged to tax capital gains as ordinary income, rejuggle tax rates to make them fairer, sweep away most deductions and special preferences, and end the "double taxation" of divid ends.
He also pledged to end the ability of corporations to defer payment of taxes on foreign-source income, eliminate the tax subsidy for exporters and revamp the deduction for home mortgage interest.
But the proposals drafteed by the Treasury outlined in a Sept. 2 memo, would soften most of these provisions - primarily for political reason - often to only a hint of what Carter promised last autumn.
The papers show these disparities:
While the Treasury proposals would tax capital gains as ordinary income, they specifically recommend against taxing capital gains at death - a central element in eliminating special treatment for investment income. And they propose a spate of exceptions to ending the existing capital gains preference, from reducing the tax bite on long-term investments, supposedly to offset inflation, to special treatment for marketable securities.
Although the Treasury package would reduce taxes for most taxpayers figures show it would do little to make the tax system more progressive, except for groups in the $100,000-a-year and up income brackets. The Treasury's charts show the new reshuffling would smooth out the present disparities in the tax burden of low and middle-income groups. But the basic structure of the tax rate system hardly would be changed. [TEXT OMITTED FROM SOURCE] indeed eliminate some key deductions, including a showy cutback in the business writeoff for martini lunches, it also would leave a sizable number intact.
While Carter promised flatly to end the "double taxation" of dividends, the Treasury package would eliminate only 20 per cent of that double burden. The remainder would continue to be taxed twice.
Carter's repeated promises to end questionable foreign tax breaks for business appear to have been ignored in the Treasury package. The proposal opposes elimination of deferral, and wants the export-subsidy provision continued for two more years.
As for simplification, while the Treasury proposals would cut red tape in some areas of the tax code, they would - by the department's own admission - complicate matters significantly in others.
For example, although taxing capital gains as ordinary income would end much of the present confusion in the tax laws, the Treasury concedes the inflation index it is proposing "would add substantial complexity".
And the special deduction developed to reduce the so-called "marriage penalty" would "add complexity" to preparation tax returns, by requiring an additional computation - even for those taking the standard deduction.
As the Treasury planners make clear, much of this softening was done for political reason. Key administration strategist simply of not believe the bill would pass if the President fully kept his promises.
Rep. Al Ullman (D-Ore.) chairman of the House Ways and Means Committee, already has warned the administration it may risk losing recent gains on taxing inherited properly if it presses for taxing capital gains at death.
However, some tax experts fret that by diluting the program in advance, Carter advisers may be giving too much away to allow the President to remain credible as an advocate of true "tax reform."
To be sure, Carter himself may patch up some of this. The President is in Camp David. Md., this weekend looking over the Treasury package, and may decide to toughen some of the proposals.
Most outside tax experts for example believe the President feels too strongly about eliminating the foreign tax break to follow fully the Treasury's advice to retain them. And the provision on capital gains at death is up in the air.
Administration sources say the President has been more aggressive than his Treasury advisers throughout the tax revision planning period, rejecting an initial proposal at the start as not comprehensive enough.
Still, in measuring the Treasury proposals against Carter's campaign promises it's clear the President's advisers left some sizable disparities. The question is , if the package emerges in the form, what will be left to bargain away?