House Democratic leaders, deeply divided over enactment of a tough corporate minimum tax, finessed the issue yesterday by agreeing to a watered-down compromise that dodges the key question of whether revenues from the tax should be used to lower other taxes or reduce deficits.
The agreement averts an intraparty fight over the issue when the House begins debate today on a proposed budget for fiscal 1986. The proposed budget relies on spending cuts rather than tax increases to reduce budget deficits by $259 billion over the next three years.
It also represents a modest victory for Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) over Majority Leader James C. Wright Jr. (D-Tex.) in their early shadow-boxing to succeed Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.), who is retiring.
But it appears to doom chances of using the minimum tax revenues to reduce deficits, even as Senate Republican leaders were hinting they would consider such a move if the House gave it strong backing. Rep. James L. Oberstar (D-Minn.), chairman of the predominantly liberal Democratic Study Group, said the compromise was "like putting an IOU in the collection plate at church."
With the support of Wright, a group of House Democrats was pushing for an amendment to the deficit-reduction plan providing for inclusion of a minimum tax on corporations. But Rostenkowski, with support from O'Neill, opposed the move, contending that revenues from any minimum tax should be used to reduce individual income tax rates as part of tax-simplification legislation later in the year.
The compromise was reached after Democrats split sharply on the issue in a caucus yesterday morning. O'Neill said afterward he thought a minimum tax would pass the House either to reduce taxes or deficits, but continued to oppose its inclusion in the deficit plan, saying it would be a "mistake in timing."
Rather than directing Ways and Means to draft minimum tax legislation that would reduce deficits by an additional $44 billion over three years, the compromise says it is the "sense of the House" that the committee should propose a minimum tax and decide on its own how the revenues should be used.
"Revenues derived from such legislation shall be applied either to tax rate reduction or deficit reduction or both," the compromise said.
"We are now united . . . . I think this will give us the votes to pass the budget," said Democratic deputy whip William V. (Bill) Alexander Jr. (D-Ark.), who had backed the effort to nail down minimum tax receipts for deficit reduction.
The compromise appeared to remove the last obstacle to passage of the budget resolution drafted last week by the House Budget Committee. Oberstar continued to push for inclusion of the minimum tax in the deficit-cutting plan, but the House Rules Committee refused to go along, allowing only a vote on the compromise. However, the committee cleared several substitutes and amendments for votes this week, including three GOP alternatives, one from the Congressional Black Caucus and one from moderate-to-conservative Democrats to freeze Social Security benefits.