The House Ways and Means Committee last night added a third year of individual cuts to the Democratic tax bill, as the Senate moved into a filibuster over a Republican proposal to give oil interests a total of $13.8 billion in tax cuts over six years.
The House proposal would require that the third year of cuts, costing $75.8 billion, be contingent on major improvements in the economy. At the same time, the panel moved toward approval of its own collection of sweeteners for the oil industry, costing a net total of $7.1 billion over six years.
The change from the Democrats' two-year bill was a token concession to President Reagan, who had insisted on a three-year bill, but administration spokesmen immediately attacked the Democratic plan on the grounds that it requires achievement of GOP economic goals using a Democratic tax bill.
The third year of tax cuts added to the Democratic bill would give the largest portion of benefits to persons earning $50,000 a year or less. The economic "triggers" were dubbed by their sponsor, Rep. Andrew Jacobs Jr. (D-Ind.) as the "take 'em at their word" amendment.
Under these provisions, the third year of cuts would go into effect Jan. 1, 1984, only if three key targets, all of which were adopted by the Reagan administration in its midyear economic report, are achieved. They are reduction of the interest rate on three-month Treasury bills to 7.5 percent in the third quarter of 1983, an average inflation rate of 7.5 percent from now through the same third quarter, and a fiscal year 1983 deficit of $22.9 billion or less.
An administration spokesman contended that the Democratic bill would automatically make achievement of the deficit target impossible because it would cut federal revenues by $6.5 billion more than the GOP bill before the Senate.
The Jacobs amendment was attacked by Rep. Barber B. Conable Jr. (N.Y.), ranking Republican on the panel, who said it would create uncertainty in the marketplace and would suggest that Democrats are willing to give assured tax breaks to a number of special-interest groups covered by other amendments, while the "ordinary wage earner" has to rely on contingencies.
The changes in oil taxes approved by the panel's Democratic caucus in a closed-door meeting would give royalty holders the equivalent of a $4,300 tax credit each year and exempt from the windfall profits tax 500 barrels of oil a day for each producer. Old oil, discovered before Jan. 1, 1979, would have a 100-barrel-a-day exemption.
In an effort to embarrass Rep. Rostenkowski (D-Ill.), chairman of the committee, over the Democrats' struggles to work out an oil deal, Conable noted that delays in completing the bill may have been caused by "the shifting sands . . . or should I say the dripping oil on your side."
Rostenkowski countered: "It's just overflow from the Senate floor."
In another element of the bidding war for votes, the House voted to expand the capital gains exclusion for people over 55 who sell their homes from $100,000 to $125,000.Also, anyone selling a home would have two years instead of 18 months to reinvest the money in a new home and avoid taxation on profits from the sale, according to another Democratic amendment.
Meanwhile, the Senate yesterday voted down an amendment from Sen. Lloyd Bentsen (D-Tex.) to give bigger tax breaks to independent oil producers and was stalling on a pair of similar amendments offered by Sens. Robert J. Dole (R-Kan.) and Pete V. Domenici (R-N.M.). Liberal Democrats, led by Sens. Edward M. Kennedy (Mass.) and Howard M. Metzenbaum (Ohio), delayed a vote on a Dole amendment that would cut oil taxes by $7.6 billion more between 1982 and 1986 than the Finance Committee would.
Dole, the Finance Committee chairman, proposed phasing out the profits tax on new oil in four steps between 1982 and 1985. The 30 percent tax would come down to 22.5 percent in 1982, 15 percent in 1983, 7.5 percent in 1984, and zero by 1985 for new oil and on heavy and tertiary oil under an additional amendment proposed by Domenici.
The administration is lukewarm about the proposals because of fears that the tax bill could become too costly. The president supported a halving in the profits tax on new oil by 1986 that is included in the Finance Committee bill. This would cost $2.9 billion between 1982 and 1986.
With Dole and Domenici's amendments, a break for new oil producers would rise from $270 million next year to $4.3 billion in 1986, totaling $10.5 billion between 1982 and 1986.
Dole admitted that his amendment was an attempt to head off Senate support for Bentsen's even more generous proposal, which would have exempted from tax a thousand barrels of oil a day for independent oil producers. The Bentsen amendment was defeated 61 to 38.