The chairman of the House Ways and Means Committee said yesterday he plans to press for a much smaller tax cut this year than the $25 billion President Carter is proposing, and will push to make it effective July 1, rather than waiting until October.
Rep. Al Ullman (D-Ore.) said in an interview he does not believe the tax cut should be any larger than is needed to offset new federal energy taxes and Social Security tax increases. Private economists now estimate that these will total $15 billion to $16 billion.
At the same time, Ullman came out in opposition to most of the remaining "tax reforms" that aides say Carter will propose. These include elimination of two foreign tax breaks for multinational corporations and a limit on deductions for such business expenses as "three-martini lunches."
Ullman also said flatly that Carter will not be able to push through any kind of comprehensive welfare "reform" plan. Ullman said he's working on a proposal to alter the welfare system on a step-by-step basis over the next three to five years.
While the chairman's positions aren't always followed precisely by the committee, he nevertheless is one of the most influential spokesman in Congress on tax issues.
Ullman said he fears that too large a tax cut may risk "overheating" the economy and bringing on a new round of inflation. And he warned that loading the tax-cut bill with more than a handful of so-called "reform provisions" could delay its passage.
He also suggested his committee may add a proposal to reduce the "double taxation" of corporate profits and dividends - even though Carter has dropped the provision. He said he offset 10 per cent of the overlap.
Ullman's remarks suggest the administration may have a more difficult time than expected in pushing throught its tax-reduction proposals. Carter is expected to formally announce his tax plan on Jan. 21, along with a modest anti-inflation program.
Ullman's position also may put him in conflict with Chairman Edmund S. Muskie (D-Maine) of the Senate Budget Committee. It was Muskie's opposition to the July 1 effective date for the tax cuts that prompted Carter to postpone it to Oct. 1.
Ullman made his remarks independent of yesterday's report that the nation's unemployment rate had plunged to 6.4 per cent in December, down from the 6.9 per cent originally reported for November. However, it was clear that any improvement in the economic outlook would only strengthen his position that a larger tax cut is not needed.
Carter originally planned a $17 billion tax cut, but raised it to $25 billion on grounds the economy needed more stimulus. He also broadened the size and scope of the business tax cuts in the package.
Ullman indicated he generally approved of the basic elements in the tax-cut portion of the Carter plan - a 2 per cent cut in tax rates for the individuals, and replacement of the $75 personal exemption with a $250 credit; and a rate cut and more liberal investment credit for business.
His opposition to Carter's "Tax reform" proposals varied from skepticism over the merits of an individual provision to fears that including too many "reforms" in the tax bill might prove a stumbling block in the Senate.
Ullman said he had "real problems" with any plan to eliminate the two foreign tax breaks Carter is attacking . . . a tax write-off for exporters using Domestic International Sales Corporations (DISCs) and a provision allowing all multinationals to defer taxes on foreign income until it is repatriated . . . mainly because they would be controversial.
He warned that trying to end both write-offs this year might provoke opposition "serious enough to slow down the whole tax bill - and I'm not going to do it." The two are regarded by "tax reform" advocates as among the more serious abuses in the tax code.
Ullman was similarly skeptical about Carter's proposal to limit deductions for business lunches. He said the committee may restrict slightly the number of deductible business expenses. But he indicated it wouldn't limit the total write-off of 50 per cent, as the President wants.
On other provisions, the Ways and Means chairman said he:
Supports a Carter plan to offer states and local governments an optional subsidy in return for ending the tax-free status of state and municipal bonds.
Approves of the President's proposals to eliminate the 4 per cent telephone excise tax and reduce employer taxes, ostensibly as an anti-inflation measure.
Would agree to an administration plan to alter the jobs credit Congress passed in 1977 to "target" the benefits more toward hiring the hard-to-employ.
Has "serious doubts" about a Carter plan to tighten tax treatment of real estate investments.
Will "look at" - but is not enthusiastic about - other Carter proposals to tighten the minimum tax on sheltered income by eliminating the deduction for taxes already paid, and a plan to end the lower "alternative tax" on capital gains.
In discussing the tax package yesterday, Ullman said he thought a $25 billion tax cut, as Carter has proposed, "would be on the high side, as of now," and that "it would be foolish to talk about too large a reduction" because of the inflation threat.
At the same time, however, he said he would oppose delaying the tax cut until Oct. 1, as Muskie has suggested, because if current forcasts are corsooner." He said the only justifiable delay would be if the energy bill hasn't passed by then.