No Tax Break for Middle Class : Senate Refuses, 71-29, to Shift Burden to the Rich

The Senate, in a determined drive to pass its historic tax reform bill, easily killed the last major challenge today--a Democratic effort to take more away from the wealthy and give a better break to the middle class.

On a 71-29 vote that saw some liberal Democrats align themselves with the Republican leadership, the Senate rejected an amendment from Sen. George J. Mitchell (D-Me.) that would have restructured the bill’s tax rates to ensure that middle-income Americans received more tax relief.

The proposal was viewed as the last serious attempt to change the massive bill crafted by the Finance Committee. Sponsors have boasted that the plan is the most comprehensive overhaul of the nation’s tax system since World War II.

Minor Amendments

After its defeat, the Senate turned to minor amendments and Republican leader Bob Dole of Kansas threatened an all-night session to complete action on the sweeping legislation. There were indications, however, that the Senate would not finish the bill until Thursday.

In the most forceful presentation in nine days of Senate debate, Mitchell displayed a mountain of statistics he said proved “beyond any doubt that this bill does a lot for the poor and a lot for the rich but not much for the middle class.”

“One of the myths about this bill is that it cuts everybody’s taxes,” he charged. “That’s a refrain we have heard over and over, but there is no evidence to support it.”

The radical tax reform bill would curtail numerous popular deductions and eliminate the current 14-bracket tax system--replacing it with two lower individual tax rates of 15% and 27%.

Mitchell’s amendment would have created a three-rate structure of 14%, 27% and 35% to provide more help to middle-income Americans.

But Republican leaders saw the amendment as a threat to the heart of the legislation, which they have argued must be kept free of major changes if it is to survive. They have been especially sensitive to the two-bracket rate structure, calling it “sacred” and “inviolate.”

Several liberal Democrats, including Sen. Edward M. Kennedy of Massachusetts, agreed with the GOP argument and joined forces with Republicans to defeat the Mitchell plan.

Finance Committee Chairman Bob Packwood (R-Ore.) called Mitchell’s proposal a “Trojan horse amendment” that could open up the bill to a myriad of other alterations and wreck the entire tax reform effort.

But Mitchell argued, “We should beware of any piece of legislation that is said to be so fragile that it must be rushed through with no amendment.”

Before it can become law, however, the bill must go through a conference with a measure approved last year by the House, which would create four tax brackets of 15%, 25%, 35% and 38%. The rate structure is expected to be a major battleground in the conference.

President Reagan’s original tax reform plan had a top tax rate of 35%--a fact that Mitchell turned on Republicans by noting that his amendment would take the Senate tax reform plan “back to what President Reagan suggested.”

Democrats took particular aim at estimates from the Joint Committee on Taxation, which showed that under the bill, people in the $30,000 to $40,000 income range would receive the lowest increase in take-home pay, while those with an income of more than $200,000 would get the largest percentage jump.

The average tax cut for those making more than $200,000 per year, Mitchell said, would be about $53,000 under the bill, while the average reduction for those in the $30,000 to $40,000 category would be $129.

Citing those figures, Sen. Jim Sasser (D-Tenn.) sighed, “Well, so much for tax reform.”

“I challenge the supporters of this bill to explain to the Senate and the American people why they feel it necessary to give such a tremendous tax cut to the wealthiest of American people,” Mitchell argued.

Mitchell is a Finance Committee member who voted for the overall bill in committee and said he still supported the thrust of the legislation.

But he charged that under the measure, up to 21 million lower- and middle-income Americans could have tax increases and he complained that it was unfair to put middle-income people in the same top tax bracket as multimillionaires.