The Senate narrowly defeated yesterday another Republican tax-limitation proposal, this one intended to lower income tax rates automatically each year to offset the impact of inflation on earnings.
Then, 39 to 40, it tentatively rejected a proposal by Sen. Jesse Helms (R-N.C.) to let motorists deduct state and local gasoline taxes from federal taxable income. This vote is open to possible reconsideration today.
On so-called "indexing" of income tax rates the vote was 42 to 46, considerably closer than last year's 37-to-57 vote against a similar proposal. This suggests increased support for the idea.
The vote was also a little closer than Wednesday's 44-to-49 defeat of a Republican amendment that would have forced periodic tax cuts starting in 1981 by limiting the government's tax revenues to a fixed percentage of gross national product each year.
Both the indexing and GNP proposals were offered as amendments to the Carter administration's oil "windfall profits" tax in a politically tinged effort by the GOP to assure that some of the money headed for the federal Treasury comes out again in the form of a tax cut.
On the oil tax, the Senate rejected 35 to 50, an oil-state proposal to reduce the windfall levy for producers who use their proceeds from oil price decontrol to increase production. The proposal by Sen. Henry Bellmon (R-Okla.) would have allowed a tax credit of up to 70 percent for a 3 percent increase in production. In revenue terms, it would have wiped out all the strengthening amendments the Senate has adopted.
Indexing, sponsored by Sens. Bob Dole (R-Kan.) and William L. Armstrong (R-Colo.), would adjust income tax brackets, deductions and the personal exemption automatically each year in conformity with the Consumer Price Index, starting in 1981.
Describing the proposal as a way to control "taxflation," Dole and Armstrong said it would protect taxpayers from being shoved into ever-higher tax brackets simply because inflation padded the numbers on their pay checks without any real growth in income, or buying power.
Without such protection, they said, the medium-income taxpayer will be propelled into the 50 percent tax bracket within 10 years, costing taxpayers as a whole $172.6 billion during the first five years of the decade.
As if anticipating defeat of the proposal, Dole said Congress has a natural reluctance to provide automatic tax adjustments because politicians like to get credit for cutting taxes, especially in election years.
But he said that such cuts, which Congress regularly approves every year or so, are distorted by the tax-bracket creep caused by inflation.
Arguing against the Dole-Armstrong proposal, Sen. Daniel P. Moynihan (D-N.Y.) said it would cost the federal Treasury billions of dollars each year, starting with $17 billion in 1981, assuming a 9.6 percent inflation rate that year. By 1984, said Moynihan, the treasury would lose $92 billion based on an inflation rate of 8.4 percent in that year.
Like the GNP proposal on Wednesday, Moynihan said, the indexing of taxes, without a comparable cutback in spending, would guarantee a "permanent deficit" for the federal budget into the 1980s.
Finance Committee Chairman Russell B. Long (D-La), arguing that Congress cannot have a balanced budget and inflation-indexed taxes at the same time, said the issue should be put off until next year for a thorough review of tax policies under economic conditions prevailing at that time.
Among Washington-area senators, only John W. Warner (R-Va.) voted for the indexing proposal. In Wednesday's vote, all but Paul S. Sarbanes (D-Md.) voted for the tax ceiling.