House-Senate conferees moved close to agreement late yesterday on a plan to earmark at least half of the revenues from President Carter's proposed crude oil tax for possible income tax reductions in the next several years.
The proposals, if adopted, would set aside a minimum of $113.6 billion -- and possibly as much as $125 billion -- in crude oil tax revenues between now and 1990 to finance tax relief for individuals and corporations.
The proposed merely would channel the money into a Special Treasury fund, without specifying how much should go to business and how much to individuals. Congress then would have to pass special tax cut legislation before any reduction could take effect.
However, as drafted last night, the measure appeared to be largely symbolic. First, if the lawmakers decided not to enact a tax cut -- or if Carter vetoed a tax-cut measure -- the president could use the money to defray ordinary government costs.
Second, to reach the $113 billion over a decade. Congress would simply be enacting the same $11 billion-plus tax cut 10 years in a row. Once it was enacted the first time, the whole amount would be taken care of.
It seems imposing when all 10 years are taken together, but on an annual basis, it is not that large.
The oil tax is intended to siphon from producers some of the extra money they would make from Carter's decision to remove federal price controls from oil. The idea behind the tax-cut fund is to discourage the administration from using these monies to increase government spending.
The conferees also began moving late yesterday to pare a Senate-passed package of $26 billion worth of engery-related tax credits for homeowners and businesses, agreeing to eliminate tax breaks for heat pumps, replacement furnaces, wood stoves, coal-and wood-burning furnaces and radiant heating panels.
Conferees also agreed to boost the tax credit for solar, wind and geothermal equipment used in homes from 30 to 40 percent of the first $10,000 spent.
Although the conference committee did not actually vote on the proposal yesterday, members seemed prepared to accept its outlines. The committee is scheduled to meet again this morning.
The proposal is part of a broader plan on how to use the expected $227.5 billion in new revenues that the crude oil tax is likely to bring in between now and 1990.
The conference committee also began considering last night a staff prosal for a compromise that would cut about $25.9 billion in energy tax credits for business and individuals tacked on by the Senate to about $6.6 billion. House members generally are opposed to approving any of the credits at all.
The proposal on how to use the oil tax revenues also would earmark portions for aid to the poor, energy development and conservation and grants for mass transit and for railroad rehabilitation.
Carter originally had asked that almost all the money go for these three purposes.
The administration raised objections to the tax cut fund yesterday, viewing it as likely to hamstring the president in managing the economy. Treasury lobbyists want to alter the proposal to allow Carter to use the money to reduce the deficit as well.
But both Democrats and Republicans on the panel appeared determined to earmark the monies for tax reduction. Neither the Senate nor the House bills as originally passed contain any such provision.
For fiscal 1981, which begins Oct. 1, Carter proposed in his budget that around $3 billion of oil tax proceeds be used to aid the poor, and the rest be used in effect for deficit reduction.
The committee plan would not disturb this, though some members would like tax cuts next fiscal year as well.
Carter has said such cuts would be inflationary.
His fiscal 1981 budget is predicated instead on an increase in tax burdens: inflation would increase effective income tax rates, and Congress has passed a Social Security tax increase to take effect next Jan. 1.
Carter has said he would reconsider and perhaps propose a tax cut if economic activity declined more than now expected.
Under yesterday's proposal, the amount to be set aside for general tax cuts would be roughly 50 to 55 percent of the total net revenues collected by the crude oil tax each year -- between $113.6 billion and $125 billion.