The House last night passed and sent to the Senate the most sweeping overhaul of the income tax system in more than 40 years, after rebellious Republicans made a final, unsuccessful, attempt to bury the bill.
The voice vote was a joint victory for President Reagan and House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), two men who tugged and coaxed Republicans and Democrats into voting for legislation few of them deeply wanted.
Reagan stepped in during the last two days and reversed an earlier defeat in the House in which only 14 GOP legislators voted to consider tax overhaul. Rostenkowski negotiated a bill through his committee with political compromises, while heading off many concessions to beneficiaries of the existing tax system.
At a jubilant news conference after the vote, Rostenkowski raised a glass of champagne and said, "This toast is to the American taxpayers. I think they won a big victory tonight. . . . We just couldn't put this bill to bed. All that nourishment came from the American people."
Reagan, in a statement issued by the White House, said the vote "moved us one historical step closer toward a new tax code for America. I congratulate the members of both parties who worked together to enable the long and arduous process of tax reform to go forward. We now look to the Senate to make all necessary changes to ensure that the final bill is unequivocally pro-family, pro-jobs and pro-growth."
The sweeping bill would reduce personal and corporate tax rates while curtailing numerous deductions and credits. Over the next five years, it would cut individual taxes by more than $140 billion, a 9 percent reduction on average, while raising business taxes by the same $140 billion so the plan would not increase the federal deficit. The measure also would excuse roughly 6 million low-income workers from income taxes.
The legislation technically would take effect on Jan. 1, 1986, but the House passed a non-binding resolution immediately after the final vote promising that many changes would not occur until the following year, so business would not delay investment plans. Because the Senate has not yet acted, it is considered unlikely that the ultimate law would take effect next year.
Reagan had promised to produce 50 GOP votes for the Democratic bill, which resembled in broad form the plan he proposed last May. He worked feverishly the last two days to prevent a repeat of the mutiny that occurred last week. After winning a key vote earlier yesterday, Reagan sent a letter to GOP members late last night in response to fears they were once again defecting.
The last key vote occurred on a Republican motion to recommit the bill to the Ways and Means Committee, a move designed to kill it. On that 256-to-171 vote to block recommittal, 49 Republicans voted with 207 Democrats to keep the bill alive.
Immediately after the recommittal vote, House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) declared the bill approved by voice vote, a procedure usually followed by a demand from Republicans for a roll-call vote. But Republicans were silent.
When GOP members later objected, O'Neill said, "The speaker looked at the Republican side and was awed there was not a roll call."
The bill faces an uncertain future in the Senate, where Senate Finance Committee Bob Packwood (R-Ore.) has said he favors the concept of tax revision but believes in using the tax code to achieve social goals. Packwood had no immediate comment on the House vote last night.
Earlier, the House defeated a GOP-backed tax measure that was broadly similar to the bill produced by the Democratic-controlled Ways and Means Committee in that it reduced tax rates and curtailed deductions. The vote was 294 to 133.
Before that, legislators handed Reagan a victory with a 258-to-168 vote to bring tax overhaul up for consideration. That vote was testimony to two days of hard politicking and heavy lobbying by Reagan, his top aides and key Democrats who were aligned behind the bill.
To achieve the margin, Reagan started with only 14 of the 182 Republican House members on his side, and all of the key congressional leaders of his party against him. The all-out effort produced the votes Reagan needed, even though only 38 percent of his party's members supported his position. Joining the 70 Republicans voting for consideration of the bill were 188 Democrats, the same number as last week. Fifty-eight Democrats and 110 Republicans voted no.
"I want to express my heartfelt thanks. . . , " Reagan said after the vote in favor of the rule setting the terms of debate and enabling the tax-overhaul issue to come to the House floor. The same legislative procedure was defeated last Wednesday in a unexpected setback that halted the tax-overhaul movement in its tracks and sent ominous signals about Reagan's second-term political strength.
Before taking up the two overhaul bills, the House voted 230 to 196 to add a $100 tax credit for contributions to congressional candidates to the Democratic bill. The legislation would repeal the current $50 credit.
Administration lobbyists worked late into the night to hold the 70 Republicans who had supported the procedural motion for the final vote on their preferred tax bill. Several Republicans had indicated in advance of voting for the rule that they would "vote their districts" on final passage.
For Democratic and Republican leaders, the political stakes represented in the vote on the rule were high. O'Neill made a rare appearance on the House floor to push for the legislation. He had promised to deliver the Democratic vote, if Reagan could produce at least 50 Republican votes.
Arguing that "people are crying for fairness in the tax code," O'Neill told a hushed audience that the overhaul package "is the first chance I have seen in my 33 years in the Congress of the United States, a body that I love, the opportunity for true tax reform."
The package O'Neill and the president pushed would reduce tax rates on individuals and corporations and curtail or wipe out tax benefits while shifting more than $100 billion in taxes from individuals to business over a five-year period. The Ways and Means bill would raise more taxes on corporations than the GOP alternative would have.
The victory on the rule was achieved despite grave doubts among members of both parties about the substance of the Ways and Means bill. That victory came only after the president made an unusual pilgrimage to Capitol Hill to argue its case.
During floor debate, relatively few members praised the Democratic proposal, and many said a favorable vote was essentially a vote to keep tax reform from dying this year. One Republican after another in early debate said the package their president supports would harm the economy and added that hoping for changes later was not enough to go on. "Even if you put a dress on a hog, it's still an ugly hog," said Rep. Stan Parris (R-Va.) in a reference to the Washington Redskins.
"I'm going to vote for the rule and give the president a chance to carry the day for the issue he feels so strongly about," said House Minority Leader Robert H. Michel (R- Ill.). Michel voted against the rule last week.
Rep. Jack Kemp (R-N.Y.), another key convert, said he would support both the rule and the Democratic bill because Reagan had pledged to veto any tax bill that did not include certain elements important to GOP members, including a personal exemption of $2,000 for all taxpayers and a 35-percent top tax rate for individuals.
The halls of Congress were awash with copies of a letter from Reagan that spelled out, detail by detail, the promises he had made verbally the day before in his journey to the Capitol. All Republican House members received the letter in which Reagan said he would "veto any tax bill that fails to meet" the objectives Kemp and others had demanded.
The Democratic bill provides a $2,000 exemption only for taxpayers who do not itemize deductions and a top personal tax rate of 38 percent, key elements that Republicans have attacked. Reagan has argued he will push the Senate next year to make the proposal more acceptable to the House GOP. To get the votes, the president put those pledges in writing.
Many legislators pointed out problems they had with the legislation, but said they would vote for it to keep tax reform moving. "It may not be a perfect bill. I don't agree with it with respect to oil and gas. . . but if you vote no, you're saying you're against tax reform," said Rep. J.J. (Jake) Pickle (D-Tex.).
During the year since the Treasury Department unveiled its plan to do away with almost every special tax break and cut individual tax rates to a maximum of 35 percent, tax overhaul has moved in fits and starts, repeatedly regaining life after being declared dead.
The forces that kept tax overhaul alive and accounted in part for its repeated rescue had less to do with the merits of the package on which many legislators agreed -- lower tax rates and the removal of 6 million low-income Americans from the tax rolls -- than with politics. Neither party, in the end, wanted to bear the blame for killing tax overhaul.
Although a public groundswell for reshaping the tax code never emerged during the long summer of hearings before the House Ways and Means Committee and the agonizing two months of tax writing in committee in the fall, Democrats did not want to derail Reagan's chief domestic second-term initiative. Republicans, more reluctant, still were worried they would be considered the party that blocked personal tax cuts.