The Senate rejected a series of efforts last night to preserve Individual Retirement Account deductions for all Americans, increasing the possibility that the sweeping tax-overhaul proposal will emerge virtually intact.
The IRA amendments had been considered the major obstacle to approving the tax package unchanged, which President Reagan and Senate leaders have insisted upon.
Proponents of the sweeping tax bill had expressed concern that additional tax breaks, even if offset by accompanying tax increases, would upset the delicate balance of benefits that have made the bill so popular.
"Clearly now, there is not going to be any major change in the outline of the bill," Finance Committee Chairman Bob Packwood (R-Ore.) said after the first amendment was defeated, 51 to 48. "There won't be any major amendment that does violence" to the bill.
Anticipating defeat of the amendments during the late-night session, Majority Leader Robert J. Dole (R-Kan.) said before the first IRA vote that the Senate might approve the historic tax package late this week or early next week.
The Finance Committee bill would reduce individual tax rates to 15 percent and 27 percent in exchange for limiting a wide range of deductions. It would repeal exisiting deductions for IRA deposits for taxpayers already covered by company retirement pensions, although interest on the accounts would remain tax-free until retirement.
The IRA votes were seen as a clear victory for the leadership's strategy of requiring for the first time in a tax bill that tax benefits restored be financed by raising taxes elsewhere. Preserving IRA deductions would mean imposing $14.7 billion to $26 billion in new taxes on other groups.
The first amendment's chief sponsors, Sens. Alfonse M. D'Amato (R-N.Y.) and Christopher J. Dodd (D-Conn.), tried several methods of paying for their amendment, finally settling on a minimum tax higher than the stiff levy included in the legislation. Even so, they were forced to scale back their proposal, limiting the IRA benefit for those in the highest tax bracket.
As supporters of tax overhaul had predicted, the tactic created enemies and allies.
"To add further to the minimum tax on capital-intensive industries is going to cost jobs," said Sen. John Heinz (R-Pa.), whose state is heavily industrialized.
Later, senators defeated, 76 to 21, an amendment by Max Baucus (D-Mont.) to preserve a limited IRA and pay for it by denying $310 of itemized deductions for single taxpayers and $620 for a joint return. A similar proposal by Alan J. Dixon (D-Ill.) was then rejected, 78 to 18.
Despite the defeat of the IRA amendments, more obstacles lie ahead.
Packwood said he expects senators to propose amendments later this week that would preserve charitable deductions for all taxpayers, restore full write-offs for business meals and entertainment, repeal several "transition rules" aimed at helping specified companies and projects, add a third and higher bracket for wealthy taxpayers and impose taxes on nonprofit hospitals, clinics and foundations that finance or perform abortions.
"There's bubbling on capital gains" and tax shelters, he said. "There's bound to be a surprise."
Earlier, senators had demonstrated the political appeal of IRAs by approving, 96 to 4, a nonbinding resolution favoring restoration of the full deduction by a House-Senate conference committee.
The leadership supported the resolution in the apparently successful hope that it would defuse support for IRA amendments.
Dole and Packwood opposed the D'Amato-Dodd proposal but vowed to work to implement the resolution in the conference committee that will reconcile the two chambers' tax plans.
D'Amato and Dodd earlier criticized the resolution as a "cop-out" that dodged the tough question of how to pay for IRA tax breaks. But after the close vote on their amendment, Dodd said he believes that the case for IRAs is stronger.
"I think that was a victory," Dodd said. "I don't have any doubt that IRAs are going to be improved in the conference."
In contrast to the Senate Finance Committee bill, the House bill would restrict IRAs only if taxpayers also have so-called "401(k)" savings plans, to which employer and employe contribute.
Proponents of the Senate legislation reminded lawmakers that removing some IRA benefits, which they said aided mostly higher-income taxpayers who could afford to save money, was the trade-off for granting tax relief to those at the lower end of the income scale.
"While we want people to save, we want to help people who can't afford to save, who maybe need to buy shoes for the baby," Sen. Russell B. Long (D-La.) said. "This bill will do something for the souls out there who don't have any tax breaks. It will lower their taxes."
President Reagan, who once supported expansion of IRAs, maintained opposition to all amendments to the Finance Committee bill. "The president wants no deals on IRAs. He wants it to go untouched, unscathed," a White House spokesman said.
IRA supporters took little comfort in the wording of the resolution, which calls for retaining IRA benefits without raising the bill's 15 percent and 27 percent tax rates for individuals and without skewing the measure's tax relief toward the rich.
House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) served notice yesterday that such resolutions will carry little weight with him when conferees begin bargaining. Rostenkowski said the Senate should decide how it wants to raise revenue lost if the resolution's provisions are enacted.
"It is unrealistic, in my view, to expect the conference to patch up what the Senate itself seems unwilling to face," Rostenkowski said in a letter to Dixon.
The impact of television -- where Senate proceedings debuted last week -- has been apparent during the three days of inaction. Many floor speeches have lasted 40 minutes or longer, and well-groomed senators have been playing to audiences far beyond curious tourists and reporters.
"I notice people don't look at each other when they debate. They look at the camera," Dodd said.
Many senators who earlier floated amendments either have yet to introduce them, have withdrawn them or have chosen nonbinding resolutions