The Senate Finance Committee yesterday broke the bank in dividing up the proceeds of the proposed windfall profits tax on oil: it voted to give away more money than the tax would collect.
The deficit occurred as the panel approved another expensive set of energy tax credits for business. The committee also voted, as an amendment to the windfall bill, to repeal a key provision of the 1976 Tax Reform Act that would have increased taxes on the sale of inherited property.
Until yesterday, the committee had voted $63.2 billion worth of tax credits and cut $19.3 billion from the estimated 10-year revenues of the House-passed windfall tax, in effect "using up $82.2 billion of the $104 billion the legislation would raise.
Yesterday the panel voted $36 billion in additional tax credits, offset slightly by $1 billion in increased tax revenue projections, pushing the total to $117.2 billion -- or $13.2 billion more than propected revenues.
Carter had hoped to use some of the money from the windfall tax to finance his new $88 billion synthetic fuel development program, now pending in the Senate Energy Committee. But the Finance Committee's action could squeeze that plan as well.
Sen. John C. Danforth (R.-Mo.) cautioned yesterday that "it's clear we are going to have to make a choice between the Energy Security Trust Fund" Carter has proposed "and these energy tax credits. There's no way you can have both."
Yesterday, in a token move toward reducing its in-house deficit, the Finance Committee voted to increase the tax that the House version would impose on oil discovered before 1972, restoring $1 billion in revenues.
However, the action, approved on a vote of 11 to 8, is not expected to survive in conference with the House. Finance Committee Chairman Russell B. Long (D-La.) said the panel would have to meet next week to pare back its tax credits.
Yesterday's action would allow businesses tax credits of 40 percent on the purchase of equipment for producing various "unconventional" forms of energy, from solar to geothermal.
This credit, proposed by Sen. Robert Packwood (R-Ore.), was opposed by the administration, which argued it would be too costly and would conflict with Carter's synthetic fuels program. The provision carried by voice vote.
The approval of the Packwood proposal yesterday appeared to heighten concern among some senators over the panel's fiscal predicament.
However, few senators seemed prepared to forgo their favorite tax-credit ideas. Sen. John Chaffee (R-R.I.) pleaded for some increases in the measure's tax bite so the committee could consider a home heating oil credit.
But the committee announced it plans to consider today a proposal by Sen. Lloyd Bentsen (D-Tex.) to exempt from the tax new production of tertiary, or hard-to-pump, oil -- a move that would trim $9.9 billion from expected revenues.
Sen. Abraham Ribicoff (D-Conn.) proposed at one point that the panel make up for some of its losses by voting to impose a 25-cent-a barrel tax on all oil used in the United States. However, there seemed to be little sentiment for the plan.
The amendment repealing the 1976 tax increase on profits from the sale of inherited property was pushed through jointly by Sens. Harry F. Byrd (Ind.-Va.) and Bob Dole (R-Kan.). The vote was 17 to 0, with several liberals in support.
The provision had been included in the 1976 Tax Reform Act and was cited then as a major victory for "tax reform" advocates, who had complained that previous law too often enabled heirs to escape taxes. But conservatives later rallied against it.
Byrd promised yesterday his subcommittee would hold hearings on a proposed Treasury compromise sometime next year, but action was considered unlikely. The provision is known formally as the "carryover basis" law.
Besides solar and geothermal energy equipment, the Packwood proposal adopted yesterday would provide a 40 percent tax credit for hydroelectric, ocean thermal, wind and biomass equipment and for public utility property.
It also would allow a 10 percent investment tax credit for the purchases of industrial heat pumps and cogeneration equipment, which enables companies to use heat from other energy production to yield still more power.