President Carter won a token victory in the Senate Finance Committee yesterday as the panel approved one of his "tax reform" proposals denying business tax deductions for the cost of maintaining yachts, hunting lodges and club memberships for entertaining clients.
The action, which would net the Treasury $114 million a year in additional revenues, appeared likely to be all the panel would add to the $1.46 billion in "tax reforms" passed by the House. Carter had sought some $9.4 billion in "loophole-closing" measures.
At the same time, the committee came within one vote of approving a proposal to slash the corporate tax rate to 42 percent by 1984, from 48 percent now, defeating it on a 9 to 9 tie only with the help of a late opposition vote by Sen. Floyd Haskell (D-Colo.) The House bill would reduce the corporate rate to 46 percent.
The committee also came within one vote of adopting a proposal by Sen. Robert Dole (R-Kan.) that would have tied a tax cut for 1980 to next year's inflation rate - a major step toward automatic "indexing" of individual income tax rates to adjust for inflation.
The Dole measure originally mustered a 9 to 7 majority, but was rejected after Sen. Spark matsunaga (D-Hawaii) switched his vote from yest to no, apparently after urging by the panel's chairman, Sen. Russell B. Long (D-La.).
Approval of the Carter "reform" measure on corporate deductions came on a relatively sizeable majority of 10 to 3.
However, it was plain there was little real enthusiasm for the provision, which was adopted mainly as a gesture for the administration.
Immediately after the vote on the deductions for yachts and hunting lodges, the committee rejected a plan by Sen. Gaylord Nelson (D-Wis.) that would have denied companies a writeoff for lunches and other entertainment provided executives and their families. The vote was 11 to 2.
The provision affecting yachts, hunting lodges and club dues was all that was left of Carter's original multibillion-dollar proposal to cut back on deductions for business entertainment - including the controversial write-off for the "three-martini lunch."
The closeness of the votes on the corporate tax rate and indexing provisions marked something of a setback for Long, who had hoped to revamp the House-passed bill according to a specific plan, and complete work on the measure this week.
On Tuesday, the committee indicated it was having second thoughts about another vote Long thought he had wrapped up - a proposal that would expand the present "earned income credit" available to help the working poor. As a result, the tax bill seems in disarray.
Had the proposal to cut corporate tax rates passed, it would have slashed business taxes by more than $10 billion, upsetting Long's plan to make the tax bill more palatable to President Carter. The proposal would have cut the rate to 46 percent in 1979 and 1980, then drop it to 42 percent between 1981 and 1964.
Earlier, the committee rejected by a 9 to 8 vote a similar proposal that would have cut the corporate tax rate to 40 percent by 1986. The House bill provides for a 2 percentage-point cut in 1979, and new graduated income tax rates for small business.
It is not immediately clear what the panel will do next or how rapidly it will finish work on the tax bill. Several of the panel's Republicans are away on a GOP campaign trip this week, and Long's plans to revamp the bill systematically do not appear to have jelled.
The "reform" proposal the panel approved yesterday would prevent corporations from claiming deductions for the cost of maintaining yachts and hunting lodges for entertaining their customers or paying for club dues for executives to use in taking clients to lunch or dinner.
Carter had argued these deductions were unfair because it enabled executives to enjoy special entertainment not available to workers.