House, Senate tax bills head for conference action.
Tax legislation that cleared the US House and Senate last week affects individuals by:
* Extending a 3 percent excise tax on phone service.
* Boosting the tax on diesel fuel.
* Imposing tougher rules for income averaging on personal income taxes.
* Repealing a major deduction for interest income.
* Levying sharply higher taxes on liquor.
Those are among key provisions that appear in separate tax bills passed last week by the House and Senate. Other measures are contained in only one of the bills and are more likely to be discarded at a conference committee to be held after Congress returns from its 10-day Easter recess, which started last Friday.
The House voted last Wednesday to raise $47.2 billion in taxes and the Senate voted last Friday to raise $45.5 billion over the three budget years starting Oct. 1. The tax hikes are part of congressional efforts to trim the federal deficit.
An overall budget plan approved by the Democratic-controlled House would trim the deficit by $182 billion over three years. In the Republican-controlled Senate, the budget committee has approved an overall plan to cut $143 billion from the deficit. When Senate leaders and President Reagan first agreed on the plan, its deficit-trimming value was estimated at $149 billion.
Some deficit-cutting action is likely before Congress adjourns for the year, given rising grass-roots pressure for action on the problem. But the House and Senate plans come nowhere near wiping out the more than $700 billion in deficits the nation is expected to run up during the fiscal 1985-87 period.
Senate Finance Committee chairman Robert Dole (R) of Kansas complained about a flurry of amendments that would have reduced the Senate's revenue bill.
''Every special-interest group in America wants the deficit cut if it doesn't cost them anything,'' he said.
The appropriate size for a deficit-reduction package remains an intensely political issue this election year. Yesterday, Democratic members of the congressional Joint Economic Committee (JEC) released a study of the economic impact of the deficit-reduction plan President Reagan supports.
''The plan is not enough,'' said Sen. Lloyd M. Bentsen (D) of Texas. ''Our study shows the remaining deficit would feed upon itself and that, partly as a result of higher interest rates and lower productivity growth, we can expect our deficit in 1989 to remain (at) $176 billion, virtually unchanged from the President's projected deficit for 1985.''
The study also projected a doubling of the national debt to $2.8 trillion by 1989 and annual interest expenses on the debt of $170 billion by 1989 if the Senate Republicans' plan is followed. The committee report said a deficit reduction of $200 billion over three years was needed, which is roughly equal to a plan advocated by Senate Democrats.
The JEC's Republican staff issued a statement criticizing the assumptions used in the Democrats' report and argued that overspending, not undertaxing, is the key economic problem.
In revenue-raising action last week, both houses of Congress voted to extend the 3 percent excise tax on telephone service through the end of 1987. It had been scheduled to expire after 1985.
Congress also moved to increase the tax on diesel fuel to offset the revenue lost when lawmakers decided to reduce stiff highway-use taxes on trucks. Under the Senate bill, the excise tax on diesel fuel would rise by 6 cents to 15 cents a gallon. The House version would raise the diesel fuel tax to 14.5 cents a gallon.
And in coming years it would be tougher for individuals to cut their income-tax payments by averaging their income. Income averaging often is used by an individual whose income jumps sharply over a three-year period. Currently, a person may average if this year's income is 20 percent higher than the average taxable income over the past four years. Under the proposed revision, a taxpayer could average if his latest year's income was 40 percent more than the average taxable income in the previous three years.
Individuals also would lose the use of a tax provision which, starting in 1985, would have allowed them to exclude up to 15 percent of their net-interest income up to a maximum of $450 for a single person and $900 for married couples. Net-interest income is interest income they received, less the amount of interest payments for which a tax deduction is taken. The House repealed the provision, while the Senate would delay it for three years.
The liquor industry, which has been experiencing declining sales, suffered a sharp setback when both the House and Senate agreed to boost taxes on hard liquor. The Senate boosted the tax on distilled spirits by $2 a gallon to $12.50 starting next year. The House raised the tax $3.75 a gallon.