Senators Amend Tax Bill, Cancel Union Oil’s Break : Vote First Change in Overhaul

The Senate’s tax-overhaul plan, widely hailed as a model of fairness and equal treatment, was amended for the first time today to eliminate one of its dozens of provisions that critics said would grant $5.5-billion worth of benefits to special interests.

Senators accepted an amendment by Sen. Howard M. Metzenbaum (D-Ohio), wiping out a special break for Union Oil Co. of California. Some of the bill’s most ardent backers, including Sen. Bob Packwood (R-Ore.), the legislation’s manager, joined to pass the amendment by a 66-30 vote.

The measure was supported in large part because the money that would be denied Unocal would be used to provide a special benefit for farmers. Under the amendment, farmers could continue to use income averaging, even though the bill would deny that tax-saving device to other Americans.

More Breaks Targeted

Packwood and other sponsors of the bill had succeeded in fighting off every change in the measure until Metzenbaum spotlighted some of the special-interest provisions. After succeeding in killing the Unocal benefit, he said he would ask the Senate to eliminate some more next week.

“If the bill is littered with special protections for those rich and powerful enough to have access to other decision-makers--no matter the relative merits of their case--then the cause of equity and fairness is the loser and the average taxpayer is the loser,” Metzenbaum said.

He took his first shot at Unocal. In effect, the provision killed by his amendment would have allowed the company to forgo paying up to $50 million of federal taxes because of a $4.4-billion debt incurred in fighting off a takeover attempt.

Californians Defend Break

“This is a brand new, fresh-off-the-shelf loophole,” Metzenbaum protested.

Sens. Pete Wilson (R-Calif.) and Alan Cranston (D-Calif.) defended the break as necessary to protect 21,000 jobs in the Los Angeles area.

Another part of the bill would benefit only Cimarron Coal Co., allowing that company, which is not incorporated, to keep a preferential tax rate for capital gains.

Looking to final passage of the massive tax plan by the middle of next week, the Senate rejected, 51 to 44, an amendment that would have allowed a partial deduction for charitable contributions made by people who do not itemize their deductions.

The deduction for non-itemizers is due to expire at the end of the year and the bill, written by the Senate Finance Committee, would not reinstate it.

Defeat of the contributions amendment meant that after six days of debate, the bill was virtually unchanged from the form in which it emerged from the committee. Leaders had pledged to keep it that way, arguing that adoption of one significant amendment could shatter the coalition united behind the measure.

The bill would cut tax rates dramatically and pay for the change by eliminating or reducing some of the deductions and exemptions in the present law that favor one class of taxpayers over another.