Patchwork Bill

After 4 1/2 months of hearings, the House Ways & Means Committee this week finally patched together a tax bill designed to raise $7.2 billion in new revenues, v. $10.2 billion which the Treasury wanted. The bill fell far short of putting arms spending on a pay-as-you-go basis, made more political sense than it did tax sense.

The bill made scant effort to dry up excess spending power--the biggest source of inflationary pressure--with heavier excise taxes on consumer goods. It provided only a $1.3 billion boost in excise taxes, v, the $3 billion the Treasury had sought. In boosting income taxes, the committee tailored its formula to favor the lower-income groups, although Treasury Secretary John Snyder had said the biggest boost should be made there. The bill:

P: Raises everybody's income-tax rate by about 4% for the full year, by boosting the rate a flat 12 1/2% as of Sept. 1. (To have a take-home pay of $40,000, a taxpayer will have to earn $369,656.)

P: Boosts wage & salary withholding from 18% to 20% of wages after exemptions.

P: Raises long-term capital gains taxes from 25% to 28.1%. Gains on residence sales will not be taxed if the money is put into a new home within a year.

P: Raises both corporate-income taxes and excess-profits taxes by a flat 5%, raises the overall corporate-tax ceiling from 62% of a company's total earnings to 70%, lowers the excess-profits tax's definition of "normal" profits from 85% of the base-period average to 75%. All these are retroactive to last Jan. 1.

P: Boosts the tax on beer, gasoline (from 1 1/2 -c- to 2-c- a gallon), liquor, cigarettes (to 8-c- a package) and autos (from 7% to 10%), sets a 10% tax on the manufacturers' price of most appliances and 8% on auto parts.

P: Withholds 20% of dividend and interest payments at the source, as wages are now withheld.

The committee truckled to the powerful farm lobby by exempting farm cooperatives, big dividend payers, from withholding taxes. Other favors for farmers: refunds from taxes on gasoline and auto parts when bought for farm equipment. The committee sent its bill to the House, which is expected to pass it this week without amendment, but the Senate may not act upon the measure until late September. Members of the potent Senate Finance Committee have already said that they will cut the income-tax increase, shorten the length of time for which increases will be retroactive, and insist that the Government trim at least $5 billion of fat out of its nonwar expenditures, in order to make the budget balance even with the smaller tax yield.

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