The Senate Finance Committee acted with unexpected speed yesterday to advance the deficit-reduction accord between the White House and congressional leaders. It unanimously approved a package of tax increases and other revenue measures that would raise more than $9 billion in the current fiscal year, which began Oct. 1.
The panel also approved $2 billion in "savings" from the Medicare program for the elderly and disabled.
Chairman Lloyd Bentsen (D-Tex.) said the package is "as painless as possible," because it would have little impact on most taxpayers, mainly tightening provisions that affect business. On Wednesday, the panel removed much of the political controversy from the bill by shelving some provisions strongly opposed by the Reagan administration.
But in one turnabout from Wednesday's action and despite administration objections, the committee voted to freeze the top estate and gift-tax rate at 55 percent for two years. Under current law, the rate would drop to 50 percent next year.
The revenue bill is designed to comply with the deficit-reduction accord, which calls for Congress to enact $9 billion in tax hikes for fiscal 1988 and $14 billion for fiscal 1989. The panel rapidly produced a consensus bill in part because of the desire of senior members -- especially Bentsen -- to cooperate with the administration in demonstrating fiscal progress both to voters and the financial markets.
Bentsen said he expects the full Senate to begin debating the bill Tuesday. The bill incorporates the tax hikes and the Medicare savings.
"I think it will pass because I think the vast majority understand it's the responsible thing to do -- that you cut these deficits or the dollar will continue to fall," he said.
If it passes the Senate, the bill will go to a House-Senate conference, where it will be blended with a House-passed bill. The House version contains many overlapping provisions, but it also contains several proposals -- similar to the ones dropped Wednesday by the Senate panel at the administration's behest -- that would raise the tax bills of upper-income taxpayers, defense contractors and other companies. House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) is expected to fight hard for his bill.
As a result, the possibility remains that a struggle between the White House and Congress might erupt over taxes. That could hamper implementation of the deficit-reduction accord.
But Bentsen said he expects there will be no strong opposition from the administration to his panel's bill. Treasury representatives "had a few disappointments, but overall, I think, they believe it's in keeping with the spirit" of the accord, Bentsen said.
Treasury Secretary James A. Baker III told reporters that he has reservations about a couple of provisions, including the proposed freeze of the estate-tax rate. But he lauded the panel for moving quickly.
Sen. Bill Bradley (D-N.J.) said that during yesterday's closed-door session Baker reiterated objections that he had voiced Wednesday to keeping the estate-tax rate at 55 percent. "But we thought it was the best thing to do," Bradley said.
The panel's bill would extend for three years the 3 percent federal excise tax on telephone bills and would deny the child-care credit for the cost of sending a child to overnight camp.
It would also close a loophole in the estate tax created by last year's tax-overhaul act.
It would also tighten a number of corporate-tax provisions. Among the biggest of these is a proposal to complete the repeal, begun in last year's tax-revision act, of a provision in the law that allows businesses to defer taxes when they sell an asset and receive payment in a series of installments. The repeal proposal would raise an estimated $1.9 billion in fiscal 1988 and $2.8 billion in fiscal 1989.
The Medicare savings approved by the committee would be achieved partly by holding payments to hospitals below the increased cost of medical services. Under the bill, Medicare payments to urban hospitals would rise 0.5 percent next year, while payments to rural hospitals would rise 3.7 percent.
Altogether the accord reached with the White House requires a $30 billion reduction in the anticipated fiscal 1988 deficit -- achieved by a combination of tax increases, fee increases and spending reductions.