Senate Panel Kills Tax on Luxury Items : Government: The committee extends a dozen special tax breaks and imposes selected hikes on corporations. The tax on high-priced cars remains.

The Senate Finance Committee voted Tuesday to kill the luxury tax on expensive yachts, planes, furs and jewels and to extend for another 18 months a dozen special tax breaks.

Renewal of the targeted tax reductions would be financed by selected tax increases on corporations. Those allowed to take advantage of the breaks include the self-employed, workers who receive education assistance from their employers and investors in low-income housing.

The panel agreed to retain the luxury tax on high-priced cars and said owners of diesel-powered recreational boats should foot most of the bill for wiping out the other taxes. Although exempt now, they would have to pay the 20.1-cent-a-gallon tax on diesel.

The luxury tax has been under attack since it was enacted in 1990 as a way to get more money from upper-income Americans without raising income tax rates. Opponents say the idea backfired by cutting demand for luxury items, resulting in a loss of many low- and middle-income jobs.

The luxury tax had been predicted to raise $25 million in 1991 and $1.5 billion over five years. It actually brought in $98.4 million in the first year. Nearly 90% of the money has come from sales of cars costing more than $30,000.

Under the committee’s bill, the tax on cars would remain, but the $30,000 threshold would be raised each year to adjust for inflation.

The remainder of the 10% tax would be wiped out retroactively to Jan. 1. It applies to the portion of the sales price that exceeds $250,000 for private planes, $100,000 for yachts and $10,000 for jewels and furs.

Repeal of most of the luxury tax and extension of the targeted tax cuts were included in a bill that Congress passed in March. It was vetoed by President Bush because it would have raised income taxes for the richest 1% of taxpayers. There is nothing so controversial in the new bill, however, and it generally has the support of the Bush Administration.

The bill would extend through Dec. 31, 1993, a dozen provisions that otherwise would expire June 30. Renewal will cost $6 billion.

Among the provisions are those allowing workers to accept tax-free up to $5,250 of employer-provided education aid per year; permitting the self-employed to take a deduction for 25% of their health insurance costs; giving businesses a credit for increased research spending, and giving investors tax incentives for building or rehabilitating rental homes for low-income people.