Senate Seeks to Delay Tax Revision : First Wants Agreement on Budget That Would Cut Deficit

The Senate, in a symbolic blow to President Reagan’s top domestic priority, sent a message Thursday that it wants to hold up action on tax revision until Congress and the White House reach agreement on a budget that would reduce the deficit.

The 72-24 vote on a non-binding resolution was an embarrassing slap in the face to advocates of tax overhaul, but Senate Finance Committee Chairman Bob Packwood (R-Ore.) said it will not deter his panel from continuing to draft a tax bill.

The resolution was sponsored by Sen. Steven D. Symms (R-Ida.), a member of the tax-writing committee who has repeatedly expressed his opposition to overhauling the tax code. Packwood, calling the move an “insane and inane approach,” accused Symms and other sponsors of using “every dilatory tactic they can find to avoid considering the tax bill.”

13 Vote for Resolution

But 13 of the 20 members of Packwood’s Finance Committee, including Senate Majority Leader Bob Dole (R-Kan.), voted for the resolution, which was attached to a bill that would transfer control of two Washington-area airports to a regional authority. California’s two senators split, with Republican Pete Wilson supporting the resolution and Democrat Alan Cranston opposing it.

Meanwhile, Senate leaders continued to delay debate on the proposed budget for fiscal 1987. They acknowledged that it would be awkward to end up with more Democrats than Republicans voting for the plan, which was written by the Republican-controlled Budget Committee.

With Senate Democrats urging that debate begin immediately on the budget, Dole and House Minority Leader Robert H. Michel (R-Ill.) wrote House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.), proposing that Democrats and Republicans agree on a timetable for considering the budget in both houses.

“If I’m going to walk off this plank,” Dole quipped, “I’d like to have some company.”

Congress already has lost all chance of adopting a budget by Tuesday, the deadline set by the Gramm-Rudman budget-balancing law.

Bill on Back Burner

Even as the Senate voted to put tax revision on the back burner, the Finance Committee kept plowing through the tax code, rejecting a provision favored by the Administration that would have adjusted business write-offs to reflect inflation.

The panel then approved, by a 12-8 vote, a compromise package that would grant more favorable tax treatment to manufacturing companies than to service firms. The amendment included a provision suggested by Dole that would give all business-related cars and light trucks faster write-offs than originally proposed by Packwood.

Following that action, the committee also moved to provide residential rental property more generous tax treatment than commercial property. Packwood had proposed a 30-year write-off period for all real estate, compared with 19 years now, but the committee’s provision would reduce Packwood’s 30 years to 25 for apartment buildings and other rental property.

The flurry of changes to Packwood’s proposed tax bill would cost the Treasury an estimated $11 billion over a five-year period. To avoid widening the deficit, the committee will have to recoup the $11 billion in revenue from other sources.

“This puts the chances of achieving lower rates further out of sight,” said Sen. John H. Chafee (R-R.I.).

Benefits for Business

Although most of its actions were aimed at providing more generous tax benefits to business, the committee drew the line at a proposal sponsored by Sen. John Heinz (R-Pa.) calling for three-year write-offs for rental tuxedos and other formal wear rather than the five-year schedule under Packwood’s plan.

The tuxedo proposal drew more wisecracks than serious arguments.

Packwood opposed the amendment on the grounds that it would “make us clearly look foolish.” And Sen. Daniel Patrick Moynihan (D-N.Y.), arguing that tuxedos do not deserve rapid write-offs, said: “I’ve seen (Deputy Treasury Secretary Richard G.) Darman in a tuxedo that was clearly more than five years old.”

Darman, the top Treasury official attending the committee’s tax-writing sessions, expressed disappointment at the committee’s decision to abandon inflation adjustments for business write-offs, which he called “the most efficient and equitable way in terms of reducing the cost of capital.”

He termed the Senate provisions an improvement over the House bill but “reserved judgment” on whether the Finance Committee bill would meet the Reagan Administration’s standard for encouraging business investment.