House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) said yesterday that the House can still pass tax-overhaul legislation this year, although he is "not encouraged" by some amendments his committee approved over the weekend.
In his first public comments since closed-door drafting began almost a month ago, Rostenkowski said that the panel has "gotten off to a slow start" but that he is "more confident each day that we can produce a bill that will come very close" to President Reagan's proposal.
The last three days were seen as a test of whether skittish legislators were willing to curb tax breaks in order to reduce personal and corporate tax rates.
Over the weekend, the panel voted to limit some popular tax benefits, such as those for tax-exempt bonds. But members also passed compromises and approved new tax breaks, making it harder to keep the final package from increasing the deficit.
"It's like fixing fences when I was a kid on the ranch," Rep. Byron L. Dorgan (D-N.D.) said. "You fix one side while the cows get out the other."
Asked about the health of the bill, declared dead on several occasions, Rostenkowski said, "I think it's well." Noting the large numbers of lobbyists crowding the hall outside the meeting room, he added, "I can tell by the pencil-striped suits we aren't going to a funeral."
By the end of the day, the committee's quest for "revenue neutrality" was unmet by $15.9 billion over five years, a relatively small amount considering the total package. But votes on the toughest issues, such as limiting state- and local-tax deductions and curtailing business-depreciation writeoffs, have not been taken.
The committee may not meet again until next week. Its most senior members are expected to spend most of this week in a House-Senate conference committee on deficit-reduction legislation.
Members agreed yesterday to measures tightening estate taxes, taxes of dependent children with income and taxation of trusts, all of which would raise revenue by $3.1 billion over five years.
But they accepted an amendment by Rep. Ed Jenkins (D-Ga.) that would let grandparents bequeath as much as $4 million to a grandchild without paying the special estate tax designed for such situations.
Members also voted to let companies deduct 10 percent of the cost of dividends they pay, but only after a 10-year phase-in period. A proposal making the deduction effective immediately, as Reagan had suggested, was defeated.
Another panel action would end the tax-free status of the first $100 in dividends received by a single person or $200 by a couple.
Members also agreed to tighten rules making it lucrative for those seeking tax shelters to buy corporations with large losses, and they curtailed tax benefits of employe stock-ownership plans, mostly by eliminating the tax credit employers can take for contributions to certain such plans.
Rostenkowski stopped short of predicting that the top rate must rise above the 35 percent proposed by Reagan to offset revenue losses from committee compromises.
He said that Reagan "has to understand I'm committed to trying to get a bill" and that the president could try to reduce rates when the tax measure moves to the Republican-controlled Senate or the House floor.
Ranking panel Republican John J. Duncan (Tenn.) said he doubts that Reagan could "enthusiastically support the tax bill by the time we get to the bottom line" and said Reagan has insisted on a top rate of no more than 35 percent.