House and Senate conferees got down to serious negotiations on taxes last night after reaching final agreement on $17.5 billion in Medicare, Medicaid and welfare cuts over the next three years.
Final approval of the cuts cleared the way for an attempt to complete work on legislation to raise taxes by $98.9 billion over the next three years. The bill had been stalled by House attempts to restore some welfare cuts pushed through Congress by President Reagan last year, but the House conferees finally yielded to Sen. Russell B. Long (D-La.) and dropped the restorations provisions.
In the one major action on the tax provisions, the conferees nearly tripled a proposed minimum tax on the wealthy.
The new tax would make an estimated 280,000 people who now pay little or nothing to the federal government pay a more than $650 million a year, starting in 1984. This amounts to more than $2,000 in new taxes for each of these individuals.
As bargaining on the tax increase began, the Reagan administration, a key House Republican and major elements of the business community lined up behind a proposal to lessen significantly the long-range tax boost on corporations.
The proposal, designed to win backing from such major corporate groups as the Business Roundtable and the National Association of Manufacturers and to increase House GOP support, would not change the scope of the measure in the years 1983 through 1985.
By 1988, however, it would provide the business community with tax breaks of $20 billion or more annually. Sources in both parties agree that the proposal would probably get votes for the tax hike from Republicans, but at the same time might alienate some Democrats.
Neither Sen. Robert J. Dole (R-Kan.), chairman of the Finance Committee, nor Rep. Dan Rostenkowski (D-Ill.), chairman of the Ways and Means Committee, has agreed to the change, although Dole said he would consider it if a majority of House negotiators lined up behind it. But Treasury Secretary Donald T. Regan, speaking for the administration, said the changes are "perfectly agreeable to us."
The tax bill places most of the burden of raised levies on corporations. The proposal to ease this burden is the first clear demonstration of the increasingly intense lobbying by the business community to change the content of the legislation.
After two days of private negotiations involving members of the House-Senate conference committee, the Reagan administration and a host of lobbyists, other developments with the tax bill included:
* The Reagan administration continued its lobbying campaign for the controversial measure, which, by some estimates, is the largest tax increase in peacetime history. The Republican National Committee announced plans for a $100,000 radio promotion in 50 cities, and Reagan met with 30 more House members yesterday as part of his personal lobbying drive.
* Rep. Norman E. D'Amours (D-N.H.) released a letter signed by 82 House members seeking a separate vote on a key provision in the tax bill requiring 10 percent withholding on dividend and interest income. The move is designed to kill the provision, which would raise an estimated $11.7 billion over three years.
* Rep. Barber B. Conable Jr. (R-N.Y.) announced plans for a new way to restrict the sale of corporate tax breaks from unprofitable companies to profitable ones seeking tax shelters through paper transactions called "leases." Corporate tax sales, which were allowed under a provision enacted last year, have become one of the more controversial elements of the tax code.
The Conable proposal would restore the attractiveness of the deals to beleaguered firms such as Chrysler and International Harvester, but would cut back on the tax breaks available to firms involved in traditional leasing.
Conable is also the key proponent of the proposed changes in business taxes. The Conable proposal, which is also known as the "Roundtable Amendment" because it was put together largely by the Business Roundtable, would save many of the tax breaks for capital intensive firms enacted last year.
The bill now before the conference committee would eliminate tax breaks on new investments scheduled to go into effect in 1985 and 1986. These breaks would give business $9.9 billion in 1986 and $18.4 billion in 1987.
The Conable amendment would postpone the effective dates of these breaks for a year, and phase them in more slowly. In addition, he would eliminate from the legislation provisions reducing the benefits of the investment tax credit, and make up for the lost revenue by making slight changes in the current depreciation formula on new investments.
Three quarters of the $17.5 billion in benefit cuts the conferees approved last night would be in the Medicare programs of health care for the elderly. A last-minute provision would block for six months proposed nursing home inspection regulations that Reps. Henry A. Waxman (D-Calif.) and John D. Dingell (D-Mich.) contended would weaken inspection seriously.