The House : Tax Reform

By a 292-136 vote, the House passed and sent to the Senate a historic bill (HR 3838) that radically changes the U.S. tax code. America’s new tax system would take full effect in 1988, lowering the top individual tax rate to 28% and the top corporate rate to 34%.

The great majority of individuals would owe less in taxes and the typical corporation more, because the bill eliminates a host of breaks that have benefited businesses and wealthy individuals. About 6 million working poor people would pay no income tax.

Perhaps the bill’s most fundamental change is that, by stripping the tax code of most of its preferential provisions for narrow interests, it seeks to direct capital away from shelters that retard national economic growth and toward the free market. The idea for investors will be to use the code to make profits rather than avoid taxes.

Supporter Lynn Martin (R-Ill.) said: “If we do not seize this opportunity, we will ensure the final and permanent victory of the special interests. The tax code will forever be their domain.”

Opponent Bill Frenzel (R-Minn.) said: “We just do not want tax reform at a cost that inflicts too much pain and too much suffering on our economy.”

Members voting yes favored the bill.

How They Voted Yea Nay No vote Rep. Moorhead (R) x Rep. Roybal (D) x Rep. Waxman (D) x

Budget Cutting

By a vote of 309 to 106, the House passed and sent to conference with the Senate a bill (HR 5300) to slice $15.1 billion from the projected deficit for fiscal 1987, which began Wednesday. The conference is expected to produce a bill lowering the expected 1987 deficit to within the $154-billion ceiling permitted by the Gramm-Rudman law.

Lawmakers thus will have sidestepped across-the-board cuts that Gramm-Rudman mandates when Congress and the White House cannot meet deficit targets. Few members relished voting on such cuts with Election Day around the corner.

This so-called “reconciliation bill” meets the 1987 target not by structural change such as a tax increase but by imposing several one-shot revenue increases, spending cuts and accounting tricks.

For example, it raises most of its money by selling assets such as Conrail and government loan portfolios, and it employs bookkeeping gimmicks such as making fiscal 1987 revenue-sharing payments in the final days of fiscal 1986 and thus swelling the 1986 deficit.

Members voting yes supported the bill.

How They Voted Yea Nay No vote Rep. Moorhead (R) x Rep. Roybal (D) x Rep. Waxman (D) x