The Reagan administration, preparing for a confrontation in the House, yesterday abandoned all pretense of seeking a "clean" tax bill and substantially altered its tax package to include special interest amendments for the oil industry, savings and loan firms and a collection of other groups.
According to congressional sources, the administration has agreed to accept a set of breaks for the oil industry that far exceed proposals in the House Democrats' bill.
The oil provisions are the key elements in the open bidding war for the votes of conservative southern Democrats -- "the boll weevils" -- who have provided the margin of victory for the administration in past budget fights.
As an added sweetener for this faction, the administration has reportedly agreed to equal House Democrats in the near elimination of the estate tax. The estate tax provisions would mean that only a tiny fraction of the wealthiest estates, less than 7,000 out of more than 2 million a year, would be subject to any federal taxation.
In addition, sources said the administration agreed to drop its opposition to "all savers certificates," a proposal intensely lobbied for by the savings and loan industry. The certificates, to be issued by savings and loans and banks, would provide up to $2,000 in tax-free interest at 70 percent of the interest rate on treasury bills.
Emerging from a meeting with President Reagan, Rep. Barber B. Conable Jr. (N.Y.), ranking Republican on the Ways and Means committee and one of the architects of the revised COP bill, said. "There will be substantial changes." He refused to discuss them in any detail. Larry Speakes, deputy White House press secretary, also refused to discuss specifics, but told reporters, "I'm not going to tell you there is not a lot of discussion in the petroleum area, there is."
The White House and congressional allies are privately working on the legislatin in preparation for major House floor fight scheduled for Wednesday. The GOP alternative bill must be completed today.
Congressional sources said the Republican alternative will include the following oil provisions:
The depletion allowance for independent producers would be frozen at 22 percent, instead of the progressive lowering of the break to the industry to 15 percent as provided by legislation passed in 1975. This proposal is not neither the Democratic bill or the GOP tax bill before the Senate.
Matching the Senate, the windfall profits tax on newly discovered oil would be lowered from 30 percent to 15 percent by 1986.
In a similar, but more expensive to the treasury, provision to one in the House bill, the exemption for royalty holders would be set at two barrels a day, or the equivalent of over an $8,500 tax credit, from 1982 through 1984, and then grow to four barrels in 1985.
Stripper wells -- those producing 10 barrels of oil or less a day -- would be exempted from the windfall profits tax if owned by independent producers.
There was no immediate revenue estimate of the cost of these provisions, although one congressional source projected that they would result in lost revenues of about $5 billion in 1986 alone. In contrast, estimates of the cost of the oil provisions in the House Democratic bill are $7.1 billion over five years through 1986.
As President Reagan met with Republicans and southern covservatives at the White House, the Ways and Means Committee gave final approval to the Democratic bill. White both the GOP and Democratic measures now provide a wide range of benefits to such groups as the oil and savings and loan industries, the major difference centers on individual income tax rate cuts.
The administration would provide 25 percent across-the-board cuts over three years, while the Democrats would target their cuts to persons making less than $50,000 a year. In addition, the Democratic bill would make the third year of cuts contingent on the achievement of economic targets set by the Reagan administration in its mid-year economic report.
In the Senate, which is debating the GOP bill, Republicans flexed their muscles and defeated 57 to 42 what many Democrats considered to be their strongest amendment.
The rejected amendment sponsored by Sen. Bill Bradley (D-N.J.) would have skewed individual tax benefits to those making less than $50,000 along the same lines as the House Democratic bill. Another amendment to skew benefits to those in the lower brackets was defeated 76 to 22 as the Senate rejected the argument of the principal sponsor, Sen. Edward M. Kennedy (D-Mass.) that the Reagan bill provides "a bonanza for the wealthiest people in this country and peanuts for the working people."