The Carter administration yesterday massed its full political forces behind a new liberal amendment to the House Ways and Means Committee tax bill, hoping to trim back cuts in capital gains taxes when the bill reaches the House floor.
The quick show of force included a full-scale news conference in which Treasury Secretary W. Michael Blumenthal and White House domestic chief Stuart E. Eizenstat formally embraced the plan.
At the same time, the Treasury published 33 pages of backup materials designed to promote the liberals' proposals - including detailed comparisons of tax reduction levels for various income brackets - that were not readily available for the committee bill.
The blitz marked the start of what apparently will be a last-ditch campaign by the White House to master support for the liberals' amendments. The plan, sponsored jointly by Reps. James C. Corman (D-Calif.) and Joseph L. Fisher (D-Va.), was drafted Thursday night with Treasury help.
Despite the administration's efforts, it appears that the plan will face a decidedly uphill fight, both in the House Rules Committee - which will decide whether to allow it on the floor - and before the full House, when the tax bill comes up next week.
One important snag could be lukewarm support by House Speaker Thomas (Tip) O'Neill Jr. (D-Mass.). While liberals describe O'Neill as sympathetic to the measure, sources close to the speaker say he is not sufficiently sold on the plan to twist arms to get in on the floor.
And strategists concede that, even if the plan makes it through the Rules Committee, it's unlike to win much support against the committee measure, which is backed by a coalition of Republicans and conservative Democrats. The two groups hold a majority as the floor.
Blumenthal conceded at a news conference yesterday that he thought the amendments had perhaps a 50-50 chance of passage on the floor. "It's not going to be easy" he told reporters. Earlier, he had described the proposals as "a significant improvement" ever the Ways and Means bill.
By-far the major elements in the administration's new package is a proposal to change the method of figuring capital gains taxes so as to deny some of the tax breaks the committee's bill would give high-income persons - particularly those with sizeable income.
The administration-backed plan also would reshuffle the tax cuts for individuals to shift more of the relief to ward taxpayers in low- and lower-middle-income brackets, those in the [WORD ILLEGIBLE]-and-under categories. The committee bill would move to the $20,000-to-$30,000 range.
he administration also is hoping to persuade the Rules Committee to allow a separate floor vote on another provision in the Ways and Means Committee bill that would provide for the first time an "inflation adjustment" for capital gains taxes Carter opposes the plan.
The Corman-Fisher proposal pointedly omitted another possible floor amendment some liberals have been seeking to release some of the burden of next year's Social Security tax increases. Both sides apparently agreed that the amendments would fare better separately.
The administration has objected to the Ways and Means Committee bill largely because of its proposed reductions in capital gains taxes. A capital gain is the profit from the sale of stocks or other assets. Only half of a capital gain is subject to income tax.
However, Eisenstat refused to say yesterday whether Carter would accept the House version of the tax bill if the liberal's amendments were included. "This amendment marks an improvement," he said, "but it's still a long legislative process."
The main trust of the liberal's capital-gains amendment would be to prevent very high income investors who have accrued "paper losses" from tax shelters from using these writeoffs in escape payment of all but a small minimum tax. The change would be a modest one. Most of the committee's capital gains cuts would remain in tact.
Under present law, both this preference income and intaxed portion of capital gains are subject to a 15 per cent minimum tax. The committee bill would impose a 10 per cent tax on some shelter income, but would allow taxpayers to reduce this week "paper losses."
The administration-backed proposal would replace this with a graduated alternatives tax that would require taxpayers to offset their capital gains with tax-shelters "losses" before excluding 50 per cent of their profits from taxation, rather than after.
The result would be to require very high-income persons with sizeable shelter "losses" to pay an effective tax rate of 17.5 per cent on their capital gains, rather than 5 per cent, as provided in the committee's bill. The move would save some $300 million.
The administration's reshuffling of the tax cuts for the individuals would be accomplished by replacing the committee's proposal to widen existing tax brackets and to boost the present personal exemptions from $730 to $1,000.
Instead, the administration's pain would raise the $35-a-person general tax credit allowed in existing law to $100 for each taxpayer and dependent, and would reduce tax rates in the middle-income brackets of $15,300 to $31,200.
Although taxpayers in these middle-income brackets would get extra relief, the plan would reduce taxes for all persons in the $50,000-and-below brackets. A family of four with income of $20,000 would save $228 under the administration plan, compared with $146 under the committee bill.
Treasury officials said that when the impact of next year's increase in Social Security taxes is taken into account, total federal tax burdens would be reduced for all taxpayers in the $17,000-and-under brackets. By contrast, the committee bill would leave almost all taxpayers behind.