House Passes Landmark Tax-Reform Bill 292-136 : Senate OK Expected Next Week

The House easily passed a landmark tax reform bill today, moving the nation a giant step closer to a new tax code that would have fewer tax breaks, lower rates and touch the pocketbooks of almost all Americans.

The sweeping overhaul of the country’s convoluted tax laws--touted by sponsors as “the great equalizer between income classes”--was approved by a 292-136 vote and sent to the Senate, which is expected to give it final passage next week.

President Reagan, who has made the issue a priority and fought hard for simplifying the tax code when the idea seemed dead time and again over the last two years, is willing to sign the bill if it reaches his desk.

In addition to limiting deductions and cutting tax rates to their lowest level in about half a century, the compromise legislation would take about 6 million working poor off the tax rolls in the next five years and raise taxes on businesses by about $120 billion while lowering taxes on individuals by a similar amount.

Top-Heavy With Loopholes

Sponsors argued that by curbing tax breaks and instituting a strong minimum tax for the wealthy and corporations, the bill would finally bring equity to a tax code that has become top-heavy with loopholes and has allowed too many people and businesses to avoid paying their fair share.

The most emotional moment of the more than three-hour debate came when retiring House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) made a rare floor speech in favor of the bill, calling it “the decision of a political lifetime” and a chance to accomplish something that had escaped Congress for years.

“We have struggled too long to waver now. We have accomplished too much to give up now. We have struggled too long to fail now,” O’Neill said. “Let’s say yes to a change. Let’s say yes to a brighter new day for American taxpayers. Let’s not wait another 50 years for reform.”

O’Neill’s remarks were greeted with a standing ovation, including Treasury Secretary James A. Baker III, who watched the debate from the visitors’ gallery.

Boosts Middle-Income Levies

But opponents contended that the bill, drafted in haste last month by House and Senate negotiators, was far from fair, would do little to simplify the tax system and could harm the economy. While the measure would cut taxes for most people, it would boost levies for about 15 million lower- and middle-income Americans, the foes argued.

They also complained that, in an effort to win needed support, sponsors loaded the bill with about $11 billion in special tax breaks for lawmakers’ favorite projects and companies.

But Rep. Dan Rostenkowski (D-Ill.), an architect of the massive legislation, said it was a “response to a moment in history” when the nation demanded fairness and equity in the tax code.

“It is not the hope of more tax cuts that stirred a doubting nation,” Rostenkowski said, stressing that people wanted to make sure others “can’t beat the system any longer.”

Only 2 Individual Rates

Under the bill, the present 15 individual tax rates, which have a top of 50%, would be replaced by two stated rates of 15% and 28% and an effective top rate of 33%. The top corporate rate of 46% would drop to 34%.

However, to pay for those reductions, the bill limits or drops a host of tax breaks, including some popular middle-class items.

For example, the deduction for contributions to Individual Retirement Accounts is severely limited, the deduction for sales taxes is dropped, the write-off for two-earner couples is eliminated and new restrictions are placed on deductions for things such as medical expenses and union dues.