House-Senate tax conferees worked into the early morning today on a bill to raise about $99 billion over three years after agreeing to make federal employes pay the Medicare part of the Social Security tax, starting next Jan. 1.
The Medicare tax next year is scheduled to be 1.3 percent of the first $35,100 in wages. For the highest-paid federal employes it would thus be $456.30.
The bill, which would recoup for the Treasury nearly a fourth of the big tax cut Congress passed at President Reagan's urging last year, will have to go back to both House and Senate when it emerges from conference, and in neither house is final passage expected to be easy in this election-recession year.
Reagan, who is now scheduled to make a nationally televised speech in behalf of the bill at 8 p.m. Monday, continued to defend it yesterday. He saw 15 more wavering members of Congress at the White House, then appeared before reporters and the television cameras in the White House press room to argue with critics who say it would be the largest peacetime tax increase in U.S. history -- "that's plain hogwash," he said -- and that he is breaking faith with his own philosophy by supporting it.
"There is not any flip-flop on this at all," he said. He said he would have liked to reduce the deficit just by spending cuts, but Congress insisted on a tax increase, too.
In addition to the new tax on federal employes, the tax conferees agreed on:
Requiring operators of hotels and restaurants to report to the Internal Revenue Service an estimate of the tips received by waiters and waitresses. Simultaneously the conferees killed a proposal to halve the deduction for business meals, the so-called "three-martini lunch."
Raising the telephone excise tax from 1 percent to 3 percent starting Jan. 1, 1983.
A set of airport taxes and user fees that would raise the tax on tickets from 5 percent to 8 percent, establish a tax of 12 to 14 cents a gallon on gasoline and jet fuel for private aircraft, and establish a $3 fee for international travel.
* A controversial provision to start withholding taxes on dividends and interest just as they are now withheld from wages. The withholding rate would be 10 percent, with exceptions for people below certain income levels and for most of those over age 65.
* A provision to reduce deductions for medical expenses. Current law allows deduction of medical expenses in excess of 3 percent of adjusted gross income. The conferees agreed to raise this to 5 percent -- but not the 7 percent first voted by the Senate. They also knocked out entirely that provision of current law which allows taxpayers to deduct half of the premiums they pay themselves for health insurance, up to a maximum deduction of $150.
* A provision rescinding a part of last year's bill that would have given businesses a large second increase in depreciation deductions on equipment, beginning in 1985, on top of a basic increase that was the heart of last year's bill and has already gone into effect.
These additional increases would have saved businesses $9.9 billion in taxes in 1986 and $18.7 billion in 1987, the first years in which they would have been much reflected.
The ranking Republican tax writer in the House, Rep. Barber B. Conable Jr. of New York, was trying, along with the Business Roundtable and National Association of Manufacturers, to preserve these breaks for business by postponing them so they would not take full effect until 1988.
* A new so-called minimum tax on wealthy individuals, to limit how much tax they could escape through other provisions in the code. This would have the effect of raising taxes an average of $2,200 each for about 280,000 taxpayers in the upper brackets. Still to be dealt with were provisions to:
* Double the federal excise tax on cigarettes to 16 cents a pack.
* Raise the excise tax on telephone service from 1 to 2 percent in 1983, and 3 percent in 1984 and 1985.
* Put restrictions on the controversial leasing provisions in last year's bill that let businesses sell tax breaks they do not need.
The tax increase is in the same bill with about $17 billion in spending cuts in Medicare, Medicaid and welfare, programs which are also under the jurisdiction of the tax-writing House Ways and Means and Senate Finance committees. These are in addition to another set of spending cuts that is before another conference committee.
Reagan has had great political trouble over the tax bill, in part with Democrats who want the Republicans to go first on this issue in an election year, in part from conservatives from his own party who oppose a reversal of last year's tax cuts.
It is this rebellion that Reagan has been trying to staunch by having wavering members to the White House. Republican leaders in Congress have said in recent days they think Reagan is making headway in his unfamiliar role as tax increase advocate, but White House spokesman Larry Speakes said yesterday the administration thinks it is still behind in the House.
Some say the vote could also be quite close in the Senate, where the bill passed only narrowly the first time around.