House Panel Votes for Tax on Jobless Pay

The House Ways and Means Committee, tentatively agreeing with a proposal in President Reagan’s tax overhaul plan, voted Friday to tax unemployment benefits fully.

Under current law, jobless benefits are taxed only when a family’s income exceeds $18,000 ($12,000 for single taxpayers), and then only on half the amount exceeding those income levels.

The Democratic-controlled panel, reaching the end of its first week of closed sessions on its own version of a comprehensive tax bill, also tentatively decided to leave the child-care credit intact. Families in which both parents work would continue to be eligible to subtract from their taxes part of their child-care expenses.

Adoption Deduction Dropped

The committee also eliminated from its proposal a $1,500 deduction for legal expenses incurred in adopting a handicapped child, but it decided to add a subsidy to the Social Security program that would benefit most such parents.

Following Reagan’s suggestion on unemployment benefits, the committee rejected by a 19-5 vote a proposal by Reps. Brian J. Donnelly (D-Mass.) and William J. Coyne (D-Pa.) to maintain current law.

“This is a real step back from a traditional Democratic position,” Donnelly said after the vote. “Under the guise of tax reform, we agreed to raise $2.3 billion from people who don’t have jobs.”

Those who favored taxing all jobless benefits, a move that would increase revenues by $2.3 billion over five years, argued that nearly all unemployed taxpayers with relatively low incomes would continue to receive benefits tax-free because of other provisions in the committee plan.

Higher Personal Exemptions

Under the draft now being considered but not yet approved by the committee, the standard deduction and personal exemptions would be significantly increased. Thus, a family of four would not be taxed until its income exceeded $14,000.

The decision on unemployment benefits, which can still be reversed by the panel, is likely to prove controversial. Nearly three years ago, at the depths of the last recession, the White House disclosed that the Administration was studying a plan to tax jobless benefits fully. Only one day later, after a storm of protests, White House spokesman Larry Speakes said that Reagan had “vetoed the idea” of additional taxes on such benefits.

However, recent lobbying on the issue has been relatively muted. When the White House raised the idea in 1982, an AFL-CIO spokesman called the proposal “callous.” But the labor federation has not taken any action on the matter this year and has focused most of its attention on a separate proposal in the revision package to tax some employer-paid fringe benefits, committee sources said.