House Is Expected to Endorse Minimum Income Tax : Non-Binding Resolution Dodges Controversy Over Using Proceeds to Cut Deficit or Rates

The Democratic-controlled House, which will begin debating the fiscal 1986 budget today, is almost certain to endorse the idea of imposing a minimum tax on those corporations and wealthy individuals who now pay little or no federal tax.

But the non-binding resolution that will be presented during the debate skirts the controversial issue that has divided some of the most powerful House Democrats: whether the proceeds of such a tax should be used to reduce the deficit or to cut tax rates as part of an overall tax reform measure.

It will be offered as an amendment to a budget approved last week on a party-line vote by the House Budget Committee. That proposal aims to cut $56 billion from next year’s deficit, now estimated to be close to $230 billion, without imposing the one-year freeze on Social Security benefits that was passed by the Senate in its version of a fiscal 1986 budget.

Pentagon Restraint

Instead, the House Budget Committee plan puts greater spending restraint on the Pentagon, freezing its spending at this year’s level. The Senate plan would allow military spending to keep up with expected inflation of about 4%.

The House Rules Committee voted to allow the full House to vote on an amendment expressing the House sentiment that the tax-writing Ways and Means Committee should prepare legislation establishing a minimum tax. But the amendment does not spell out the specifics of such a tax or declare how much money it should raise.

Leaders Compromise

Democratic leaders, compromising over the thorniest issue, agreed that the amendment would allow the newly generated tax revenues to be applied “either to rate reduction or deficit reduction, or both.”

House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) said that using the revenue to cut deficits would be a “mistake in timing” because it would remove from tax reform legislation one of its most politically popular elements.

He had the support of Rep. Dan Rostenkowski (D-Ill.), chairman of the tax-writing Ways and Means Committee, who adamantly opposes using revenue from the minimum tax as part of deficit reduction before tax reform has been accomplished. “Our first order of business is to reduce the (tax) rates for people, as promised,” Rostenkowski told reporters.

On the other side, Rep. James L. Oberstar (D-Minn.), who tried unsuccessfully to persuade the Rules Committee to allow the House to vote on an amendment specifying that the tax revenue be used for deficit reduction, said O’Neill’s approach represents only “good intentions.” The plan, he said, is “sort of like putting an IOU in the collection plate at church.”

House Majority Leader Jim Wright (D-Tex.) said he agrees that the revenue should be used to cut the deficit.

Several Alternatives

During the House budget debate, which is expected to last through Thursday, a variety of alternatives to the House Budget Committee package will be offered. Most would achieve as much deficit reduction as the Budget Committee plan but with different spending priorities. They include:

--An alternative by conservative Republicans, led by California Rep. William E. Dannemeyer of Fullerton, that is similar to the Senate-passed plan except that it would hold Social Security increases to 2% a year over the next three years.

--A plan by moderate House Republicans that would freeze defense spending and make no recommendation on Social Security.

--A proposal by the Congressional Black Caucus that would freeze defense spending, maintain or increase spending for a variety of domestic programs and raise taxes by almost $28 billion in 1986.

--A Republican leadership proposal that would allow full cost-of-living increases for Social Security recipients as well as inflationary growth in the defense budget but would make sharper cuts than the Budget Committee package in domestic programs.