The house, chopping down a final effort to strip out tax breaks for oil producers, yesterday passed and sent to President Reagan a $749 billion tax cut that he says will transform the U.S. economy. The vote was 282 to 95 and Reagan is to sign the measure into law later this week.
Congress then recessed until after Labor Day.
In addition to taking the largest slice out of federal revenues in history, the bill approved yesterday radically alters the tax structure. In years to come, the corporate tax on income from new investment will be nearly eliminated; individual tax rates will be indexed or cut automatically each year to compensate for inflation; the estate tax, part of the populist legacy to the tax code, will be all but gutted; and capital gains taxes, which fall almost exclusively on the wealthy, will be cut retroactively more than any other form of individual income levy in the bill.
Once a "clean" bill calling only for across-the-board rate cuts and a new system of depreciation write-offs, the tax legislation was turned by a bidding war between Democrats and Republicans into a 194-page document full of sweeteners for a host of special interests ranging from savings and loan asociations to oil producers, from overseas employes of mutinational corporations to beneficaries of stock option plans, from trucking companies to the buyers of two-year-old racehorses.
For individuals, the bill provides 25 percent rate cuts in each tax bracket starting with 5 percent Oct. 1. It will be followed by 10 percent cuts on July 1, 1982 and 1983. In 1982, the average cut for a taxpayer earning between $20,000 and $30,000, the upper end of the median range for a family of four, will be $389. For taxpayers in the range of $50,000 to $100,000 this will grow to $1,656, and for those in the highest brackets, $200,000 and above, it will average $22,129.
In one last futile assault on the legislation, House Democratic liberals led by Rep. James M. Shannon (Mass.) forced a vote that could have opened up the bill to amendment, specifically a proposal to cut back on provisions giving the oil industry a total of $11.8 billion over the next five years. They were beaten easily, 282 to 95.
Only one Republican, Rep. James M. Jeffords (Vt.), voted against the bill. The entire Virginia delegation voted for it with the exception of Stan Parris (R), who did not vote. Among area Marylanders, Rep. Michael Barnes (D) voted against the bill, while Reps. Steny H. Hoyer (D), Marjorie S. Holt (R), and Roy P. Dyson (D) voted for it.
In one of the sharpest attacks on the breaks for the oil industry, a highly profitable segment of the American economy, Rep. Parren J. Michel (D-Md.), former chairman of the Congressional Black Caucus, said there are 2,000 former Comprehensive Employment and Training Act employes out of work in his district as a result of the administration's budget cuts. "How in the name of God do I go back to these same people and say you've got to make a sacrifice when we are giving $12 billion to the oil companies?" he asked his colleagues.
Rep. Bill Frenzel (R-Minn.), a senior Republican on the Ways and Means Committee, countered that many members have questions about specific provisions, but argued that its overall effect will be to improve productivity and to reduce inflation.
After the final vote, Rep. James C. Wright Jr. (D-Tex.), the majority leader and a politician caught between and populist background and a Fort Worth constituency top heavy with oil money, said: "It is in my judgment far from an equitable bill but it's apparent it isn't going to get any better."
As finally approved, the bill puts into law the new "10-5-3" depeciation schedule for new business investment; cuts taxes for two married workers by giving a $1,500 maximum deduction to the lesser-paid spouse in 1982, rising to $3,000 in 1983; increases the maximum child care credit to $720 for one child and $1,440 for two or more; raises to $125,000 the tax-free profits from a home sale available to persons 55 and over; creates a new charitable deduction for users of the short form reaching unlimited amounts in 1985; gives U.S. citizens working abroad a $75,000 exclusion on American tax liability, growing to $95,000 in 1986; raises the estate tax exemption to $600,000 by 1986 and lowers the maximum rate from 70 to 50 percent; lowers the capital gains rate from 28 to 20 percent retroactively to June 10, 1981; and allows everyone to postpone taxation on up to $2,000 in income each year by putting the money into an individual retirement amount.