Moving into the thicket of overhauling the federal tax code, the House Ways and Means Committee voted yesterday to tax all unemployment compensation as income and to preserve almost all existing tax benefits for workers having child-care expenses.
The thicket was marked not only by tough political choices but also by the sights and sounds of high-stakes policymaking -- reports of angry congressmen saying behind closed doors that their futures ride on certain tax breaks, hallways clogged with lobbyists for every group from Girl Scouts to baseball teams, and a conspicuous absence of lobbyists representing "common folk."
However, the only issues resolved were ones regarding "common folk."
The 19-to-5 vote to tax unemployment compensation came over heated opposition from Rep. Brian J. Donnelly (D-Mass.), who argued that it penalized the poor. Supporters of the change said the poor would be spared because they are to be removed from the tax rolls through other changes.
Under current law, only a portion of unemployment compensation is taxed -- less than one-third nationwide in 1982.
The child care provisions, proposed by Rep. Barbara B. Kennelly (D-Conn.) and Rep. Willis Gradison (R-Ohio), would leave intact a current tax credit for child care expenses, which once appeared targeted for cutback. President Reagan supported the credit, after earlier proposing to convert it to a deduction -- benefiting wealthy families more than those in the lower range.
At Kennelly's urging, the panel also voted to continue the current tax exemption for day care provided by employers, but only up to $5,000 a year -- a limit that aides said would affect about 6 million upper-income taxpayers. Committee Chairman Dan Rostenkowski (D-Ill.) had initially proposed repealing that provision.
The deliberations were held behind the committee's closed wooden door, marked "private," and members were seen only as they whooshed in and out -- often with foreheads creased -- on breaks. Several dozen lobbyists have taken to "camping out" in the hall, awaiting a precious few seconds of access.
"You have to get your pitch down to 12 seconds," said an official of Independent Sector, an umbrella group of organizations working to save the popular writeoff for charitable gifts by taxpayers who do not itemize deductions -- a tax break worth an estimated $11 billion over five years.
The composition of lobbyists, and their conversations, changed depending on what tax provision the committee was deliberating. When the charitable deduction was on the block, the United Way, Catholic Charities, Girl Scouts, and assorted university groups dominated -- warning that they and others would lose $6 billion in donations if the tax break is repealed, as Reagan and Rostenkowski have proposed.
When that thorny decision was deferred until next week, and the committee moved on to an equally nettlesome proposal to curb deductions for business meals and entertainment, a wave of lobbyists for major league baseball, theaters, restaurants, hotels, travel services and more took over.
The talk then turned to restaurant workers whose jobs are linked to expense-account dining, and such issues as whether baseball tickets should remain tax-deductible for businesses. Reagan wants to repeal the deduction; Rostenkowski wants to cut it to 50 percent, but lobbyist Bill Cable, representing baseball commissioner Peter Ueberroth, wanted to know: "Why are the first 4 1/2 innings deductible and the rest aren't?"
That issue also was put off until next week because, committee staff members said, numerous options remain to be explored. Rep. Robert Matsui (D-Calif.) said the panel was so closely divided that some members feared the existing business deductions would have survived intact if the provision had come to a vote.
"I think a lot of people didn't want to end our first week of tax reform by voting to tax the unemployed and then giving away meals and entertainment and theater tickets," Matsui said.
The committee also deferred votes on the emotionally charged issue of how to increase the $1,040 personal exemption and the standard deduction -- changes that would remove millions of poor families from the tax rolls, while also greatly benefiting wealthy and middle-income taxpayers.