HEARINGS GIVE CLUES AS TO HOW SEN. LONG AIMS TO GET TAX MEASURE CARTER CAN SIGN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81M00980R000600060008-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 15, 2016
• Document Release Date: May 18, 2004
• Sequence Number: 8
• Publication Date: August 28, 1978
• Content Type: NSPR

ON PAGE
THE WALL STREET JOURNAL
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Hearings Give Clues as to. How Sen?: Lo
Aims to Get Tax Measure. Carter-Can Sign
By JOHN PIERSON
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON-One of Russell Longs;
strengths as a legislative operator is that he
doesn't want much for himself.
Take the tax bill of 1978, for example.
A week of hearings by the Senate Fi-
nance Committee and sometimes Delphic ut-
terances by Chairman Long suggest that the
Louisiana Democrat' would be happy if all
he got from the next six weeks of work on the
tax bill was (1) Something President Carter
could sign and (2) Additional tax breaks for
companies that set up Employe Stock Own-
ership Plans, or ESOPs.
Getting the second should be easy, if Sen.
Long can only figure out a way to get the
first. His ESOP bill would cost-the Treasury
$1.8 billion next'year. hardly a sum the rest
of Congress and Mr. Carter could begrudge
someone who saved them from a tax-bill
veto in an election year.
Mr. Carter says he will veto the bill.. un-
less the Senate and. House-Senate conferees
"correct some of the basic errors" in the
House-passed version. That means.- the
President says,'producing a bill that would
make the tax code fairer, simpler and more
friendly to capital- formation than the House
bill.
Precisely how Sen. Long will try to trans-
late those splendid principles into legislative
language remains unclear. But the' Finance
Committee hearings have produced some
hints.
Miller -to Testify
The hearings -are due to end Sept. 6 with
testimony from Federal Reserve Board
Chairman G. William Miller. The committee
plans to start drafting its version of the tax
bill Sept. 7. . .-.>..: .. . .
.In Mr. Carter's, eyes, the basic error the
House committed was to give too much of
its $16.3 billion tax cut to rich folk and too
little to everyone. else: What the President
regards as a maldistribution of benefits oc-
curs because of the House's hefty cut in cap-
ital-gains taxes and because the House voted
against. trying. to make the tax code: more
"progressive" ..and. decided, for the, first
time in years. to make everyone s share- of
the tax...cut roughly equal -to his current
share of the tax burden..
Whatever Mr. Carter's: views; the. winds
on Capitol Hill are blowing strongly toward
a big cut in. capital-gains taxes and against
more - tax ?progressivity. Thus,- even if he
.wanted to. Sen. Long. probably couldn't
switch benefits from the upper end of the in=
come scale to the lower end.
The best hecan do for his President is to
pile on more benefits at the lower 'end. And
that's going to cost moremrtoney._ ':-
Take capital gains, which are gains from
the sale of.corporate stock, real estate and
other capital assets. The House voted to cut
the top tax rate on capital gains to 35% from
49% by removing them from the list of pref-
erences under both the 15% minimum tax
and the 50% maximum tax.on earned in-
It also voted to "index" gains for infla-
tion, starting in 1980, by permitting owners
of capital assets to increase their cost basis
in line with consumer prices. The House bill
also would allow homeowners to avoid tax,
once in a lifetime, on up. to $100,000 of profit
from a home sale. . -
In place of the old 15% minimum tax on
gains, the House agreed to establish a new
10% alternative minimum tax. which would
have to be-paid only to the extent it ex-
ceeded regular tax liability. The House bill
also would repeal the option of having the
first $50.000 of capital gains, taxed at no
more than .25%.
These changes would produce a net tax
cut of S1.9" billion next year and $6.8 billion a
year by 1983. after indexing started to have
an effect.
The homeowners' exclusion was added
after President Carter denounced the cap!
tal-gains provisions for 'providing "huge to
windfalls for millionaires and two. bits for
the average American." Some 96%6 of the
benefits from changing the minimum, maxi-
mum and alternative taxes 'would go to
those earning more than $50,000 a year.
. More than 71% of the benefits of indexing'
would go to taxpayers making more than'.
$50,000. The homeowners' tax break is the!
only part of the capital-gains package that,
could be described as providing most of itsl
benefits directly to. "average" Americans;j
70% of it would go to those in the 510,000-to-'
$50,000 income class.
Chairman Long finds himself caught be-
tween Mr. Carter, who. wants the capital-
gains relief scaled down and the alternative
minimum tax toughened, and 60 Senators
sponsoring the "Steiger" plan, named for
Rep. William Steiger (R., - Wis.), which
would cut the top rate on capital gains even
further than the House bill, to 25%. .
To placate his Senate colleagues. Sen.
Long appears to be leaning toward a capital-
gains package that would include the House
provision eliminating gains as a preference
item under both the minimum and maxi-
mum taxes, plus something President Ken-
nedy proposed in 1963-an increase in the
capital-gains exclusion to 70% from 50%.
To soothe the President; Sen. Long seems;,
also to. be thinking about a much tougher al-
ternative minimum' tax than the House:
passed, deleting indexing, and maybe even
reducing the House-passed homeowners' tax
break.. :.-
Removing gains as a preference item and
raising the exclusion to 70% would cut the'
top rate on capital- gains to 21%. even fur-
ther than the Steiger plan. Unlike the
Steiger plan, however, raising. the exclusion!
would-also benefit asset-holders in all tax
brackets. It would, for example_ help com-
:pensate '.homeowners:for- a less-generous
A. tougher alternative- minimum tax
would reduce the, number ' of high-income
persons who, use other. deductions Ito shelter 1
-large capital gains from'-tax, and could raise
some revenue-to help pay- for Sen. Long's
capital again package.:... "
Eliminating inflation indexing would save
the Treasury lots _ of money in the. long
run and might be the single most important
step toward avoiding a presidential veto.
A capital-gains package' like this would;
cost the Treasury about $3 billion next year,I
half again as much as the House-passed pro-l
visions. But neither estimate assumes anyl
revenue "feedback" from increased sales of,
capital assets or increased. capital invest-1
ment.
After toyingwith the concept for. -years,
Sen.-Long has lately come to?develop an al-1
most irresistible-taste for feedback. So its
wouldn't surprise anyone to find the Finance
Committee approving a big cut in capital-
gains rates with a small price tag. ' .
Another way Chairman Long likes to rer
duce the size of tax-cut bills is to delay ef-
fective dates, a device that helps him avoid
running afoul of the letter, if not.the spirit,
of congressional budget procedures. As a
further revenue offset in` the area of 'capital
gains, he has even hinted that he might try
taxing capital gains unrealized at the death
of the,asset holder, a long-sought goal of lib-
eral tax" "reformers."
A big cut in rates would take some of the
sting out of taxing gains at death. ?
As for the other "error"-President Carter4
says the House committed too much for the,
rich, too little for everyone else-Sen. Long!
seems determined to correct this mainly by
piling on more benefits at the lower end of
the income scale. This could be done in a":
variety of ways, by increasing the earned ind
come credit for the working poor, for exam-
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In addition, the Finance Committee al-
ready has approved a more generous credit
for the elderly, and all of the benefit, about
$300 billion, would go to those earning less
than $20,000 a year. Provisions like this- will
certainly almost be added to the big tax bill
to fatten the tax breaks for low and middle-
income people.
Sen. Long would like.to provide a large
enough.cut in income taxes to offset the in-
crease that's: due to occur'next year, as So-
.cial Security taxes rise.. and as inflation
pushes individuals into higher income-tax
brackets. Social Security and inflation will
add an estimated $11 billion to $12 billion to
the individual tax burden between 1978 and
1979. The House bill would offset only $10.4
billion of that.
"I hope we can change the bill to make it
a. tax cut for everybody," Sen.' Long said at
the hearings. ? Instead of the House bill's
$16.3 billion cut, he said, he's thinking more
in terms of-a reduction of $20 billion.
Cliairman. Long isn't the only member of
the Finance Committee, or of the Senate,
with Ideas about how to distribute that
money. Along the way to trying to produce a
bill President darter can sign, Sen. Long
will have to deal with strong demands for,
among other things: a cut in the top corpo-
rate rate deeper than the House-passed re-
duction to 461% from 48%6; an exemption
from the top corporate rate higher than the
House's $100,000, which is twice the existing
figure; retention of the general jobs tax
credit, instead of the targeted credit the
House approved; a still more generous, in-
vestment-tax credit than the House voted,
and a separate charitable deduction for tax-
payers who use the standard deduction.
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