Rostenkowski Offers Tax Bill Compromises

House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), making the first offer for a compromise tax bill, said Friday that he would accept lower individual tax rates and fewer personal tax breaks if the Senate would agree to crack down on corporate tax preferences.

“A logical compromise would have the House move toward the Senate rates and the Senate move toward the House” on distributing the tax burden, Rostenkowski said. “It’s a formula that would give the new law the most fairness and economic force.”

The House version seeks to preserve individual tax preferences while raising corporate taxes, while the Senate seeks to dramatically force down income tax rates, preserve some corporate tax breaks and reduce individual tax preferences.

In a speech in Boston, Rostenkowski said: “Every item in the House bill is negotiable.” The text of the speech was made available in Washington.

“The real fight won’t be between the House and Senate--but between corporate lobbyists and the middle-income taxpayer,” said Rostenkowski, who will head House forces in the tax overhaul conference expected to begin next month.

“To the extent we give to special corporate interests, we must take from middle-income earners--or raise marginal rates,” he said.

Rostenkowski’s view is shared by Senate Finance Committee Chairman Bob Packwood (R-Ore.).

“Those who want loopholes and privileges haven’t given up on this bill,” Packwood said recently. “They’re girding their loins for the conference with the House.”

Limit on Deductions

Both the House and Senate bills would limit numerous tax deductions in exchange for lower rates. But they take starkly different approaches.

The House has approved a four-bracket rate structure of 15%, 25%, 35% and 38% for individuals--compared to the current structure ranging between 11% and 50%--and would raise taxes on business by about $140 billion in five years to help pay for the lower individual rates. It would hit hard at many business tax preferences and leave nearly all personal tax deductions intact.

The Senate has two brackets--15% and 27%, although some high- income taxpayers would effectively pay a 32% tax on some of their income. It would raise corporate taxes by about $105 billion in five years. It would drastically reduce individual tax breaks, notably for individual retirement account contributions and consumer interest payments, but would preserve many preferences for specific industries.

‘Politically Sensitive’

Rostenkowski stressed the possibilities of compromise, noting that, “I hope the Senate conferees will find our corporate reforms as worthy as the House conferees find some of the Senate’s individual reforms.”

But he also highlighted “some provisions, like (preserving the deductibility of) state and local taxes and IRAs, (as) obviously more politically sensitive than others.”

Rostenkowski made clear that he believes the Senate bill does not hit hard enough at corporate tax preferences.

Citing House moves to take away tax breaks for defense contractors, oil drilling, banks and corporate mergers, he noted that “the Senate bill largely spares these and other industries--and in some cases treats them better than under present law--making this a certain field of conflict and compromise.”

With the tax conference tentatively scheduled to begin on July 16, Rostenkowski said the bargainers would “be lucky to finish our work in a month,” by the time Congress goes in recess again on Aug. 15.

But he left no doubt that the most sweeping overhaul of the tax code in decades would be signed into law by President Reagan this year.

“Now that we’ve got it to the top of the hill, no one is strong enough to stop its forward force,” Rostenkowski said. “From now on, it’s largely a matter of guiding it to the (White House) Rose Garden.”