Massive Tax Bill Passed by House : Bipartisan Vote Indicates Senate Will Swiftly Approve Measure Also

The House, all but guaranteeing that 1987 income taxes will be figured under radically different rules, Thursday voted 292 to 136 to accept compromise tax-overhaul legislation that bumps millions of the poor off the tax rolls and puts scores of corporations back on.

The size and bipartisan sweep of the victory erased all fears that the measure--which voters have greeted warily--might face trouble in the Senate. The bill’s co-author, Senate Finance Committee Chairman Bob Packwood (R-Ore.), said that 70 to 85 of the 100 senators back the measure and that he is “ready to go” for final approval.

Goes to President

That could occur as early as this weekend. The legislation will then go to President Reagan, who has promised to sign it.

House critics of the massive tax bill, most of them Republicans, argued listlessly in several hours of debate that the bill would slow economic growth, kill tax breaks that finance billions in factory investments and abolish the average family’s most popular deductions. One opponent charged that the bill would cripple the war on drugs and the search for a cancer cure by eliminating tax breaks for the federal pensions of FBI agents and scientists.

“How many members of this body have read this 2,000-page document?” asked the opposition leader, Rep. Bill Archer (R-Tex.), waving a thick copy of the bill. “The answer is none . . . . There is fear, uneasiness about this process.”

But the attacks hardly ruffled Rep. Dan Rostenkowski (D-Ill.), the House Ways and Means Committee chairman who ground out the tax package with Packwood in a House-Senate conference committee this summer.

“Today’s vote is very straightforward. Do we want to give this country tax reform, or don’t we?” Rostenkowski asked. “Or do we want to stand for the status quo, which goes hard on the poor--and easy on the rich? . . . The special interest or the public interest--which do we choose?”

What the lawmakers chose, critics and backers agree, promises to turn the current tax system upside down. The legislation demolishes the elaborate maze of loopholes and shelters that has allowed businesses and individuals alike to escape taxes and, some charge, to destroy American faith in the tax code’s fairness.

The bill also demolishes the huge corporate tax cut enacted in the Reagan Administration’s first year. It shifts $120 billion in taxes from families to businesses over five years and removes the 6 million poorest taxpayers from the rolls altogether.

Compresses Tax Brackets

Under the plan, the current 15 brackets for individuals would be compressed to five brackets in the 1987 tax year and to two, 15% and 28%, in 1988. More affluent households--single persons making more than $43,150 and joint returns with earnings exceeding $71,900--would lose some deductions and effectively pay rates of 33% on income above those break points.

The effective tax rate returns to 28% on income beyond $100,470 for single persons and $171,090 for couples. In addition, for joint returns, the 33% bracket is extended by $10,920 for each personal exemption beyond the first two.

Four of every five households would pay taxes at a maximum rate of 15%, and roughly the same proportion would receive an actual tax cut from the legislation.

Although corporations would pay more, the tax burden would be spread more evenly among heavy industries, which often have paid low taxes under current law, and high-tax businesses such as stores and white-collar firms. That, with the closing of corporate loopholes, enabled tax writers to cut the corporate tax rate from 46% to 34%.

Ironically, suspicious voters have ignored those enticements. And many supportive lawmakers, failing to detect a groundswell for the bill back home, took pains to lambaste the measure, even as they voted for it.

Supporter Lynn Martin (R-Ill.) said the bill was filled with “junk.” Rep. Buddy Roemer (D-La.) compared it with a 5-day-old fish. Rep. Judd Gregg (R-N. H.) said it is larded with “academic drivel . . . but on balance, this bill is fair.”

Opposition leader Archer and other critics gambled that lawmakers, responding to wary voters, would support a last-ditch attempt to send the bill back to the House-Senate tax-writing panel for revisions. Most believed that such a move would have killed the bill because Congress has only a few working weeks until it adjourns.

Controls Revolt

The tactic alarmed Rostenkowski and others Wednesday, but Archer’s budding revolt was under control by Thursday’s vote.

Rep. Richard A. Gephardt (D-Mo.), an author of early tax-overhaul legislation, warned lawmakers not to be panicked by the voters’ silence. “The only lobbyist you haven’t seen here is the lobbyist for the average tax-paying American,” he said. “You’re the lobbyist for that family.”

And Republican Guy Vander Jagt of Michigan gave his audience a lesson on the bill’s political benefits, telling them that the bill cuts taxes for an average of 242,000 households in each House district.

“I wouldn’t want to explain to a crowd ginned up by a skillful and exploitative challenger why I voted against that,” he said.

With those arguments, the vote to send the bill back to the tax panel was swamped, 268 nays to 160 yeas, and approval of the measure was but a formality.

Although the outcome was never seriously in doubt, the bill’s backers took few chances. Reagan wrote a letter to fence-sitting House members, and Treasury Secretary James A. Baker followed up by having breakfast with some dissidents and collaring others for private meetings.

Elegant Oratory

The most elegant oratory may have come from retiring House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.), who called a vote for the bill “the decision of a political lifetime.” The Speaker said lawmakers had “come too far to waver now . . . accomplished too much to give up now” and “struggled too long to fail now.” And he called the measure’s $40 billion in tax relief for the working poor “the best anti-poverty bill we have seen in years.”

O’Neill’s ideological opposite, conservative Rep. Jack Kemp (R-N. Y.), later paid him a tribute. “I don’t want to ruin Tip’s day,” he said, “but I agree with him.”