A majority of Democrats on the House Ways and Means Committee has informally agreed to a scaled-back version of President Carter's tax cut plan that panel leaders hope will serve as a compromise to save the tax bill from defeat.
Their proposal involves a net income tax cut of $9 billion - compared to the $24.5 billion Carter proposed - plus $5 billion in Social Security tax reductions to be considered in separate legislation. The plan includes only a handful of "reforms."
Although the Democrats haven't actually voted on the measure, Rep. Al Ullman (D-Ore.), the committee's chairman, says the plan parallels "where the majority seems to be going." Ullman has been conferring with members all week.
The Ways and Means chairman says he intends to discuss the compromise proposal with Rep. Barber B. Conable (R-N.Y.), the committee's ranking minority member. If Conable goes along, the panel could resume work on the tax bill next week.
The Ullman proposal includes these elements:
Quick approval, in a separeate bill, of a $4 billion to $5 billion reduction in Social Security taxes, to be financed by using general income-tax revenues to underwrite the hospital insurance or disability programs for two years.
Congress would then try again next year to deal with longer-run financial problems facing the Social Security trust funds. It passed tax increases last winter to solve these longer-run problems, but the House Democratic Caucus has now asked that these tax increases be rescinded, at least in part.
$9 billion in next tax reductions, comprising $15 billion in tax cuts for individuals and business, offset by $6 billion in revenue-raising "reforms." Carter wants $33.4 billion in cuts, offset by $9 million in "reforms."
A handful of tax "reform" proposals, including repeal of present itemized deductions for state and local gasoline and sales taxes and the existing business deductions for company yachts and purchases of sporting tickets.
Those changes, along with a few others, would yield an estimated $4 billion in regained revenues. The panel than would reap $2 billion more by selling back an existing jobs tax credit to apply only to hiring in inner cities.
The Democrats then would seek a deal with Republicans to try to "compromise out" a proposal by Rep. William A. Steiger (R-Wis.) that would lower capital gains tax rates and eliminate capital gains from the so-called minimum tax.
The Steiger proposal is considered a major threat to enactment of the bill. Ways and Means liberals have warned that if the Steiger provision is approved, they will vote to jettison the entire Carter package.
Capital gains are the profits from the sale of stocks or other assets. At present, only half are subject to tax. The Steiger amendment would trim the maximum tax rate on capital gains to 25 per cent and exempt them from the minimum tax, which applies to otherwise tax-free income.
Finally, Ullman indicated he effectively has given up on his proposal to reduce the "double taxation" of corporate profits and stockholder dividends. As it stands now, he said, passage of this measure looks "pretty impossible."
The outlook for the Ullman compromise still is not certain. Although many key Democrats support the general outlines of the plan, details aren't ironed out. And GOP members want a larger tax cut, with the Steiger amendment.
The Carter administration still is publicly pushing for its original tax plan. Ullman said White House officials told him earlier this week they support his plan for the jobs tax credit, but he hasn't discussed the rest with them.
One problem the administration is facing is that Ullman is pressing to prohibit floor amendments when the bill goes to the House - even to give of Carter's original "reforms."
The Ways and Means chairman said yesterday that if House leaders allow separate floor votes on the "reform" provisions, they'll have to open the bill up to other amendments as well - "and we'd have more to lose than to gain."
Ullman also confirmed that committee members seem to be somewhat less enthused about pushing through a cut in Social Security taxes than they were a few weeks ago. But he said the panel would act anyway to satisfy the caucus.