Senate Tax Panel Likely to Aid Heavy Industries

The Senate Finance Committee, clearly demonstrating its favoritism toward heavy industry, moved Wednesday toward approval of a complex proposal that would provide further tax write-offs for manufacturing, telephone and mining companies at the expense of most service firms.

Sen. William V. Roth Jr. (R-Del.) introduced an amendment to the tax bill--which appeared to have the support of a majority of the panel members--aimed at cushioning most manufacturing industries against the expected loss of the 10% investment tax credit.

The proposal, compared to the original plan offered by Chairman Bob Packwood (R-Ore.), would funnel to business an estimated $24 billion over five years in additional write-offs for specific business investments, supporters say. Small business would receive about $8 billion less in write-offs than Packwood offered but would still gain $15 billion over current law.

Cost Is $16 Billion

As a result, the proposal would cost the federal Treasury $16 billion over the next five years, requiring the committee to find that much in revenue from other sources to avoid widening the budget deficit.

The final vote on the deal, worked out in a series of back-room negotiations in the last couple of months, is expected today. The overall proposal was endorsed by Treasury officials attending the committee’s deliberations.

The idea behind the proposal is to use the “tax system to accomplish certain economic goals for your country,” Sen. Lloyd Bentsen (D-Tex.) said.

But outnumbered opponents complained that the 20-member panel was bent on approving a radical departure from the goal of revising the tax code in a way that avoids favoring one type of business over another. “No group of 20 Americans can define which equipment to produce or not,” Sen. George J. Mitchell (D-Me.) said. “We don’t have faith in the free enterprise system.”

‘Productivity Property’

Mitchell argued that it is absurd to provide fewer tax benefits to a plumber who buys a particular piece of equipment than those granted to a manufacturing firm that buys the same equipment.

Under the Roth proposal, co-sponsored by six other senior members of the committee, selected “productivity property” used for manufacturing, mining, telephone services or transportation would receive faster write-offs than investments by other types of business firms. The plan would also provide more favorable treatment to rental car firms and business purchases of light trucks than Packwood had proposed, while trimming write-offs for computers.

In addition, the amendment goes along with a Treasury plan to index investment write-offs fully against inflation, up to 8% a year.

In contrast to the House tax bill, which would cut back on business depreciation write-offs by about $41 billion over five years, the amendment would leave the Senate bill actually increasing such write-offs by about $4 billion.

Meanwhile, the committee overwhelmingly rejected an attempt by Sen. Bill Bradley (D-N.J.) to limit tax preferences for the oil industry and timber producers.

His proposals never won more than three votes from the panel, which is heavily composed of senators from states that greatly depend on natural resource industries.