Congress moved into the final lap of deficit-cutting yesterday as two massive negotiating teams tackled the job of reducing the 1988 deficit by $30.2 billion.
Relatively few concrete actions were taken by House-Senate conference committees charged with reconciling differing versions of two bills: a $600 billion spending measure and a package of tax increases and spending cuts. But legislators said they sensed a strong desire to finish both tasks by the middle of this week, in order to wrap up the 1987 congressional session considerably before Christmas.
"We are near the conclusion of an enormous task," said Senate Appropriations Committee Chairman John C. Stennis (D-Miss.).
Tax negotiators agreed to accept $1.8 billion worth of provisions that are identical in the House and Senate bills, including an extension of the 3 percent tax on telephone service, which otherwise would expire at the end of this year. Other identical provisions, virtually certain to become law, include denial of the child-care tax credit for the cost of sending a child to overnight camp, imposition of Social Security taxes on employers for tips earned by their employes and imposition of a flat 34 percent tax rate on "personal service corporations," including certain types of law and other professional firms.
The conference also agreed to adopt new user fees for Internal Revenue Service rulings for individual taxpayers and for certain services of the Bureau of Alcohol, Tobacco and Firearms.
As expected, House tax negotiators agreed to drop $2 billion worth of "sweeteners" and technical tax corrections from their bill to comply with terms of the deficit-reduction agreement reached last month between congressional leaders and the Reagan administration. That agreement called for $9 billion in tax increases, but specified that every provision must raise revenue.
Many of the dropped provisions were special favors to constituent interests, but others would have had a substantial impact on many taxpayers. The most significant would have repealed a provision of the 1986 tax-revision law requiring investors in stock or bond mutual funds to pay taxes on a portion of the funds' operating expenses. Because the provision was dropped, an estimated 20 million investors will have to pay taxes on that "phantom" income.
The tax conference was just one of 15 "subconferences" involving more than 200 lawmakers that must find compromises on a massive package that also includes cuts in so-called entitlement programs, such as Medicare and farm subsidies.
Meanwhile, another group of House and Senate conferees formally began the task of reconciling their differences over a $600 billion omnibus appropriations measure that will fund most government operations through the end of the fiscal year on Sept. 30. However, the real work will begin today when 13 subcommittees begin meeting.
The spending bill conference is charged with detailing the discretionary spending cuts needed to trim $7.6 billion from the deficit, $5 billion of it from military accounts and the remainder from domestic programs.
The most contentious issue facing negotiators is how much additional nonlethal aid to provide for the Nicaraguan contras. The House version of the legislation contains no additional money for the rebels, while the Senate bill provides $9 million through February, with as much as $6 million more to cover the cost of transporting the assistance, limited to food, clothing, medical supplies and shelter.
A House Appropriations Committee aide said he expects the spending bill conferees to complete their work as early as Wednesday, which would mean the legislation would be ready for floor action in the House and Senate on Saturday.