Panel OKs End to Write-Off for Political Gifts

The House Ways and Means Committee, again failing to deal with the most controversial aspects of President Reagan’s tax overhaul proposal, agreed Wednesday to eliminate the tax credit for political contributions and approved a package of detailed provisions designed to improve compliance with the tax laws.

By following the White House recommendation to drop the tax credit, the panel decided that its tax revision plan would not include a credit for contributions to political campaigns that is limited to $50 ($100 for joint returns). The credit is included on slightly more than 5 million tax returns and is worth about $300 million a year to those taxpayers.

The committee also adopted a series of compliance provisions, including tighter rules for those required to make estimated tax payments, stiffer penalties for fraud and a doubling of the fee for taxpayers who do not first ask for an Internal Revenue Service review of their complaint before taking their case to court.

‘Pro-Taxpayer’ Proposal

And the committee adopted a proposal that staff members referred to as “pro-taxpayer” that is designed to avoid excessive interest charges and to prevent taxpayers from paying for errors by the IRS.

But taxpayers could be penalized if they fail to report large cash transactions. In addition, companies and individuals would be ineligible for federal contracts or licenses if they have exhausted all legal claims in a tax dispute and still have failed to pay taxes.

Meanwhile, President Reagan again warned that he would veto any bill that included a tax increase “no matter how it’s disguised or packaged.”

The Ways and Means Committee has promised to produce a tax package that raises the same revenues as current law, but Reagan told a Republican fund-raising group in Virginia that unnamed opponents of his tax measure are attempting to “pervert” his proposal and “turn it into a sneaky way of raising America’s taxes.”