Key House Democrats yesterday agreed to accept without alteration the $98.5 billion tax increase the Republican-controlled Senate passed last week.
The Democrats' extraordinary decision, which would be an abandonment of the constitutional role of the House to initiate tax legislation, was made in caucus by the party members on the tax-writing Ways and Means Committee.
Republicans on the Ways and Means Committee, in an effort to ensure their ability to seek minor changes in the legislation in a House-Senate conference, stalled the Democratic move to accept the Senate version, but the panel is to take action on the bill today.
But the Democrats' decision greatly increases chances that Congress will pass the Senate bill, which would be the largest tax increase in peacetime history.
The Democrats were anxious partly to avoid responsibility for tax increases in this election and recession year. They feared that any amendment of the bill on their part would give Republicans a chance to label it a "Democratic tax increase."
The independent oil industry, a major source of campaign contributions to Republicans and some oil-state Democrats, successfully lobbied to kill a contemplated Democratic alternative to the Senate bill that would have increased oil taxes.
The industry, capitalizing on Democratic anxieties, split the House leadership, and in the process produced significant defeats for House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) and Rep. Dan Rostenkowski (D-Ill.), Ways and Means chairman, each of whom had advocated additional oil taxes.
For individuals, the Senate bill would mean among other things the withholding of taxes on interest and dividends and an extra 8-cent-a-pack tax on cigarettes. For business the bill would in effect take back a significant share of the large tax cut Congress voted last year.
"There is no constituency for reform," Rep. Richard A. Gephardt (D-Mo.), a Ways and Means member, said in describing the Democrats' political calculation.
"People don't want to pay any more taxes," Rep. Wyche Fowler Jr. (D-Ga.) said. "This is a Republican bill raising taxes in an election year in the middle of a recession."
But the Democratic decision was attacked quickly by conservative Republicans on the panel.
"This is a major abortion of the U.S. Constitution," Rep. John H. Rousselot (R-Calif.) said. "It's a new low in partisan politics," Rep. W. Henson Moore (R-La.) added, to ensure that the "tax bill doesn't get Democratic fingerprints on it."
The decision to accept the Senate bill, which would still have to go to a House-Senate conference, was a direct rebuff to Rostenkowski, who last week presented committee Democrats with an outline of a possible bill that accepted many of the Senate provisions and added some.
These included increased taxes on life insurance companies and contractors and, more important, provisions to wipe out some oil tax breaks enacted last year and reduce older oil tax breaks involving depletion and intangible drilling costs.
Oil-state Democrats quickly balked, and the possible political danger of a "Democratic" tax bill began to be raised with a vengeance.
Within the committee Democratic caucus, Rep. Beryl Anthony Jr. (D-Ark.) reportedly said that inclusion of the oil provisions would damage party relationships with independent oil producers.
Rep. James M. Shannon (D-Mass.), sources said, countered that the panel "is a tax-writing committee, not a fund-raising committee."
Rep. Ken Holland (D-S.C.) reportedly shot back that one of the main reasons the oil tax increases were included was that independent oilmen in Texas and Oklahoma are helping to finance O'Neill's Republican opponent in November.
Other opponents of the oil tax increases included Rep. Tony Coelho (D-Calif.), chairman of the Democratic Congressional Campaign Committee, who said he has been struggling to get independent oilmen to start contributing to Democratic candidates again. In addition, he noted that his district includes the Coalinga oil field. "I know the business and I represent it," he said.
Later, when the Democratic whips met, opposition to taxing oil was voiced by Majority Leader James C. Wright Jr. (D-Tex.), Martin Frost (D-Tex.) and Gillis W. Long (D-La.), head of the Democratic Caucus.
Initially, Rostenkowski said the oil industry had "blown him out of the water." Yesterday he tried to make the best of the situation:
"We have a product written by Republicans known as the Dole-Reagan bill that we can take to the floor."