In their first serious attempt to place their party's stamp on tax-revision legislation, House Democratic negotiators yesterday approved large portions of a comprehensive proposal that they will place before Senate conferees today.
The offer includes more stringent write-offs for new investments than the Senate has suggested, the preservation of the deduction for state and local sales taxes, which the Senate bill would curtail, and limits on tax benefits for oil and gas production and for defense contractors, sources said.
The House Democratic conferees, meeting in private, tentatively agreed to stick with some Senate tax provisions, such as repeal of the deduction for interest on credit-card and auto loans and a sharp crackdown on tax shelters that would particularly hit real estate. House members also were looking at including oil and gas in their tax-shelter curbs.
They accepted for now the Senate's top tax rate for individuals of 27 percent, compared with the current top rate of 50 percent.
Many of the provisional changes approved by the seven House Democratic members of the tax conference committee were drawn from the House bill. Until now, House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) has let Senate Finance Committee Chairman Bob Packwood (R-Ore.) propose alterations to the Senate bill, which is being used as the basis for negotiation.
"We're certainly going to offer a complete package of those parts of the House bill we think ought to be retained," said Rep. Donald J. Pease (D-Ohio).
The four House Republican conferees were not invited to the closed-door session to help draft the offer, which one aide described as "a third tax bill" after the Senate and House measures. The GOP conferees will be told of the contents of the plan before it is sent to the senators.
On Tuesday Senate negotiators proposed limits on corporate and individual deductions that would raise about $30 billion in revenue over six years. That money would be used to keep the Senate bill from increasing the federal deficit and to enhance the bill's tax relief for low- and middle-income taxpayers.
Most of the Senate's tax-increase proposals, which were drawn largely from the House tax bill, are expected to be included or exceeded in the House counteroffer. One conferee said the offer would shift about $50 billion to $60 billion in taxes from individuals to corporations, in addition to the Senate proposal and the $93 billion in new corporate taxes that already is part of the Senate plan.
House Democrats also indicated that they would propose Individual Retirement Account deductions more generous than the Senate limits, which would deny the deduction of contributions for workers covered by a company pension plan while letting the interest build up tax free. House members are looking at restoring part of the deduction for contributions, now set at $2,000 per year, for taxpayers earning less than $50,000.
They also were examining ways to offset the effect on taxpayers of starting the bill's tax rate cuts six months after deductions are limited. Rather than change the date, House members were considering expanding tax benefits for lower-income taxpayers in the first year. New figures indicate that the delay would mostly raise taxes on the well-to-do, so that protecting relatively poor taxpayers would cost little federal revenue.
Rep. Fortney H. (Pete) Stark (D-Calif.) said the process of trading offers behind closed doors probably will continue until conferees from both chambers have agreed on the general shape of a compromise bill.
"Then we'll start dotting the i's and crossing the t's," Stark said.
It is not clear when that point will be reached. Although Senate conferees had no public reaction to the House proposal, several of the 11 senators have said that even the Senate's last offer, with its $30 billion in higher corporate taxes, strained their willingness to compromise.
Packwood said in a speech yesterday, however, that he still expects the conference to finish its work by mid-August.
Among the tentative decisions made by the House Democratic conferees:
The Senate rate structure of two individual rates of 15 percent and 27 percent and a corporate rate of 33 percent would be retained.
Depreciation, the system by which companies write off the loss in value of their aging assets, would raise about $30 billion in revenue from 1986 to 1991 in comparison to the Senate bill. The House-passed depreciation provisions would raise $38 billion more than the Senate-passed plan.
Consumer interest would not be deductible, but sales taxes would.
Two important tax benefits for oil and gas production, fast writeoffs for certain production costs and the deduction of a flat percentage of gross income, would be limited for most producers. Those breaks would be retained under the Senate bill.