Working past 2 a.m. yesterday, House-Senate conferees reached final agreement on a bill to increase taxes by $98.3 billion over three years, putting the overwhelming majority of the increases on corporations and the rich, and adding $1.9 billion to carry the extended unemployment benefits program through the Nov. 2 general election.
Congress, pressing to leave town by the end of the week, will take up the bill this week under unprecedented political circumstances: the most conservative, pro-business president of the last 50 years has put the full force of his office behind legislation which, if enacted, would represent a major victory for advocates of tighter restrictions on tax breaks for wealthy individuals and corporations. President Reagan is to endorse the bill in a televised speech at 8 tonight, and yesterday he invited 32 House Republicans to Camp David for hot dogs, hamburgers, baked beans and a personal pitch for their support.
President's speech will be live on major television networks at 8 tonight. Channel 26 will rebroadcast it at midnight.
White House chief of staff James A. Baker III warned that the fight to win passage of the tax increase bill is "going to be a very, very difficult battle. It's very much uphill."
Baker, interviewed on "Face the Nation" (CBS, WDVM), said he doubts that half the 192 Republicans in the House will vote for the measure. "I can't tell you that we'll get more than 80. It's going to be a target that we'll shoot at, somewhere between 75 and 90." Baker acknowledged that enactment "will require very strong Democratic support."
The last-minute addition of the unemployment benefits extension was designed to pick up support from members of both parties representing districts and states where many constituents are out of work.
For many states, the extended unemployment benefits program would have died on Sept. 25, just weeks before the election, under budget-cutting legislation passed at the behest of the Reagan administration. The $1.9 billion addition to the bill would guarantee 10 extra weeks to 38 states, including California, where many of the state's GOP congressmen are opposed to a tax increase.
Maryland would get 10 extra weeks, the District of Columbia eight and Virginia six.
While the conferees may have picked up votes with the unemployment aid program, they refused to budge from the Senate proposal to raise the tax on cigarettes from 8 cents to 16 cents a pack. This provision is likely to force many tobacco state congressmen to vote against the conference bill.
In addition, House Democratic conferees insisted that the legislation retain tough tax increases on business, rejecting GOP and administration pressure to lessen the increases in an effort to gain support from business groups.
The legislation approved by the House-Senate conferees stands in sharp contrast to the administration's 1981 tax bill, which granted extensive tax breaks to corporations on the theory that the money would increase investment, and skewed individual tax cuts to those in the upper brackets on the assumption they would save and invest much of the money.
But Reagan, in an interview with The Washington Times to be published today, countered criticism of the bill by Rep. Jack Kemp (R-N.Y.), the leading congressional supply-sider who has accused the president of deserting his economic principles. "I am most hard put to understand how Kemp can continue to believe that this tax increase bill in some way represents a turn in my direction or philosophy because it doesn't," Reagan said.
Major provisions of the legislation as approved by the conferees:
* The reduction or elimination of a wide range of business tax breaks enacted last year. Corporate tax sales through paper "leases" would be eliminated by Jan. 1, 1984, along with stepped-up depreciation benefits scheduled to go into effect in 1985 and 1986.
Just over $51 billion of the $98.3 billion to be raised over three years would come from corporations, and the corporate share will grow significantly in 1986 and thereafter. This estimate does not include many of the new taxes that fall on individuals and corporations, including 10 percent withholding on interest and dividends and a tripled telephone tax.
* Perhaps the most controversial section of the bill would require banks, savings and loans and corporations issuing interest and dividend payments to withhold 10 percent for the Internal Revenue Service. In an effort to quiet opposition from the influential banking lobby, the conferees postponed the effective date to July 1, 1983.
* The conferees backed off a provision approved by the Senate that would have halved the deduction for business meals, the so-called "three-martini lunch." Instead, the bill includes approved a requirement that hotel and restaurant owners report to the IRS estimates of the tips earned by waiters and waitresses, based on a calculation of 8 percent of total income from meals.
* The conferees agreed to a major increase in the minimum tax on individuals. This tax is directed at wealthy people who pay little or no tax on income from investments because of special tax preferences. It will require about 280,000 people to pay an average of about $2,200 more in taxes annually starting in 1984.
* In a reflection of the changed tenor of Congress, the conferees also eliminated from the bill a number of special-interest amendments designed to help foundations that own profitable enterprises and killed two sections designed to give new tax breaks to persons who profit from capital gains.
The Senate had appoved two provisions, one reducing the holding period from a year to six months to qualify for capital gains treatment and the other indexing capital gains to the inflation rate. But both were rejected. CAPTION: Picture, President Reagan walks with a group of 32 House Republicans he invited to Camp David yesterday for lunch and a pitch for support of the $98.3 billion tax increase bill. White House photo via UPI