The Senate Finance Committee yesterday approved the controversial bill repealing withholding of taxes on interest and dividends, but then loaded it up with other major provisions, complicating its prospects for passage.
Pressed by Chairman Robert J. Dole (R-Kan.), who wants to save withholding, the committee added President Reagan's tax and tariff proposals to shore up the Caribbean Basin economy; his proposal to set up low-tax enterprise zones to encourage businesses to return to center cities; a minor but disputed trade reciprocity bill, and a bill to continue beyond this year's expiration date the power of state and municipal governments to issue mortgage interest bonds through which they help people buy homes.
Sen. Russell B. Long (D-La.), senior Democrat on the committee and a withholding opponent, suggested that Dole was sabotaging the bill. "What's being contrived is a way this bill will die a natural death. It will expire on the speaker's desk," Long said.
"I don't know why anyone can draw that conclusion," Dole replied.
Chairman Dan Rostenkowski (D-Ill.) of the House Ways and Means Committee has indicated that he will have no part of a withholding bill that includes such add-ons as the Caribbean Basin provisions.
The withholding provision was the leading element in the $100 billion tax increase Congress voted last year. Scheduled to take effect July 1, it would raise $13.4 billion through 1988, much of it in taxes on income that now goes unreported.
But the banking industry has lobbied strenuously to reverse last year's vote and kill withholding, and both houses have now voted in somewhat different ways to do so, over the opposition of Reagan and many of their leaders, including both Rostenkowski and Dole.
The Finance Committee was deciding yesterday whether to stick with its complicated repeal bill or accept the simpler House version. The Senate version was qualified, partly to make it less of a rebuff to the president and enable him to back off his veto threats and sign it. Rostenkowski would have none of such niceties, insisting that the Republicans in the House choose directly between the bankers and the president.
While Rostenkowski is likely to resist most of yesterday's add-ons, the president could well welcome them; they might make it still easier for him to sign the bill.
The Caribbean Basin initiative and enterprise zones are key parts of the administration's program. In addition, the committee qualified its repeal of withholding slightly by adding provisions requiring 20 percent withholding for persons found not to have reported dividend or interest income, and creating penalties for nonpayment of taxes on income and dividends.
These new compliance provisions would raise an estimated $4.9 billion through 1988.
The bill with the add-ons was sent to the Senate floor by an 11-to-8 party-line vote. Dole said it will be taken up next week.
Long said he expects to try to persuade the Senate to drop all the provisions added by the Finance Committee. "I would hope we would just pass it and send it down to the president and let him do what he wants--sign it or veto it. Then we'll have a chance to override," he said.
The House last year passed the Caribbean Basin provisions, but this year Rostenkowski has said that he intends to give organized labor, which opposes them, a second chance, and so he is unwilling just to accept them in the withholding bill.