The Senate last night narrowly defeated a politically engaging move by Republicans aimed at forcing huge tax cuts starting in 1981 by imposing a ceiling on federal revenues.
The vote was 44 to 49, with five Democrats joining a unified GOP bloc to make the vote close enough to provide some anxious moments for the Carter administration and Senate Budget Committee Chairman Edmund S. Muskie (D-Maine).
Had the Republican move succeeded, the administration's oil "windfall profits" tax would have been broadened to include language barring federal tax revenues from exceeding a fixed percentage of the nation's gross national product: 20.5 percent in 1981, 20 percent in 1982 and 19.5 percent thereafter.
Sen. William V. Roth (R-Del.), the amendment's chief sponsor, contended the taxing "cap" would have produced a tax cut of $39 billion in 1981, $40 billion in 1982, $52 billion in 1983 and $55 billion in 1984.
But Muskie, in an impassioned argument, contended it would have torpedoed efforts to produce a balanced budget by 1981, and Sen. Daniel P. Moynihan (D-N.Y.) argued it would have guaranteed "permanent deficits" into the mid-1980s.
Muskie, Moynihan and other Democratic leaders finally prevailed on a parliamentary move by Senate Majority Leader Robert C. Byrd (D-W. Va.) that saved the Senate from voting on the merits of the issue.
Instead, the Senate simply voted against waiving its budget-process rules requiring clearance for such matters by the Budget Committee, thereby preventing the GOP proposal from coming to a vote.While Moynihan hailed the vote as maintaining the "integrity of the budget process," Republicans complained bitterly that they had been cheated out of a vote and vowed to continue pressing the issue.
It will arise again, perhaps today, in another Republican-sponsored move to "index," or adjust, federal income tax brackets to take into account the diminishing value of the dollar because of inflation.
In debate on his proposal, Roth contended that inflation, the proposed windfall profits tax and other forces will boost the government's share of GNP, the value of all goods and services produced by Americans, to nearly 22 percent by 1981, substantially higher than its average of 19 percent over the last quarter-century. A ceiling, he said, is necessary to "stop the growth of government expansion."
The concept was endorsed by President Carter in his 1976 campaign and has drawn increasing support in the House. But Muskie contended that Roth's proposal would cut taxes without a comparable reduction in spending and thereby "subvert the budget process, hold out hollow promises to the American people. . . and plunge the budget into irretrievable deficit until 1983."
Earlier in the day, independent oil producers won another round in the windfall profits tax fight as the Senate shelved a proposal that would have kept them from taking the depletion allowance -- an income tax deduction -- on income earned when oil exceeded certain base prices.
The proposal, sponsored by Sen. Patrick J. Leahy (D-Vt.), was rejected 37 to 57. Leahy argued that independents ought not to get a tax break on top of a windfall from the extra money they will get as oil price controls are removed.
In an earlier tax incentive for the independents, the Senate voted to exempt them from paying any of the windfall tax it is levying on other producers.
Both votes shifted the burden of the tax toward the major oil companies on the theory -- which is disputed by a minority of senators -- that the independents, who do most of the nation's oil exploration, need a tax incentive to continue.
Together the two incentives add to about $25 billion for independent producers over the next decade: $10 billion from the tax exemption and $14.6 billion from the depletion allowance.