House Passses Bill Ordering $7.6-Billion Spending Cut : Senate Panel Approves $23 Billion in Taxes

WASHINGTON —  The Senate Finance Committee on Thursday approved a two-year, $23-billion tax increase bill that would have relatively little impact on the average taxpayer but take more revenue from corporations and wealthy individuals.

The measure would raise $9 billion for 1988 and $14 billion in the following year under the deficit-reduction package devised by the Reagan Administration and congressional negotiators.

The committee agreed also on $4 billion in cuts in entitlement programs called for in the package. The reductions, made by revising guidelines for payments to recipients, would trim $2 billion in reimbursements to doctors and hospitals through the Medicare program and scale back farm programs, student loans and other entitlement spending.

The action, added to the other savings prescribed in the deficit-reduction agreement, is designed to cut the deficit by $30 billion.

The tax bill includes a three-year extension of the 3% federal excise tax on telephone calls, which is scheduled to expire this year. Social Security taxes would be charged on the salaries of spouses and children hired in family businesses, on pay earned by inactive-duty military reservists for attending weekend drills and on wages of some workers on small farms.

But the biggest bite--more than $7 billion of the $9 billion in first-year revenues--would come from businesses and wealthy taxpayers.

Unanimous Vote

There would be “very little” added financial burden on the average taxpayer, Finance Committee Chairman Lloyd Bentsen (D-Tex.) said. Bentsen opened the private meeting at which the bill was prepared to allow reporters to witness the unanimous vote approving the measure.

Treasury Secretary James A. Baker III, who attended the session on behalf of the Administration, told Bentsen: “We congratulate you for expeditious action. Good work.”

Baker gave a thumbs-up sign, indicating that the Administration will endorse the tax part of the deficit-reduction package.

Passage Predicted

Bentsen predicted that the full Senate would accept the tax bill next week. “I think it will pass,” he said. “It’s the responsible thing to do.”

If the bill is passed, a House-Senate conference will prepare a final version of the legislation. The House already has passed a bill containing many of the tax items approved Thursday by the Senate committee.

When asked if the tax package would reassure nervous financial markets, Bentsen replied: “When the market falls 76 points, Wall Street blames Washington. When it goes up 76 points, they are great pickers of stocks.”

During its private deliberations Wednesday and Thursday, the committee abandoned several controversial ideas, including a proposal to apply the 1.45% Medicare payroll tax to all income, thereby lifting the current $43,800 salary ceiling. This proposal was rejected after strong objections by the Reagan Administration and some committee members. The Medicare tax is collected as part of the Social Security tax.

Freeze on Estate Tax

However, the committee ignored another Administration concern and decided to freeze the top rate on estate taxes at 55% for the next two years. The rate had been scheduled to drop to 50% next year. The freeze, which would raise $200 million over two years, would result in higher taxes on only the biggest estates, those of $2.5 million or more.

The committee moved also to restrict tax savings available to large estates on the sale of securities to a corporation’s employee stock plan. This would raise $2.8 billion over two years.

Among other provisions of the measure:

--Taxes would be increased by $4.7 billion over two years for automobile manufacturers and other industrial companies that sell their products on installment plans.

Vacation Pay Deductions

--Companies’ deductions on money set aside to cover employees’ vacation pay would be restricted. This would increase revenues by $2.2 billion over two years.

--The temporary federal tax on companies to pay for the unemployment insurance program would be extended for three years, raising $1.7 billion. The funds go into general revenue.

--Farms with receipts of more than $25 million a year would pay more taxes under a new accounting system required by the bill.

--The child-care tax credit for the cost of sending a youngster to summer camp would be abolished.

Higher Taxes for Doctors

--Taxpayers who form personal service corporations, such as some doctors and attorneys, would have to pay a 34% tax rate, rather than being able to use the lower, graduated rates of 15% and 28% available to individuals.

The committee voted to give the IRS a three-year extension of authority to withhold tax refunds from persons who have overdue student loan payments and other obligations to the government.

The panel voted also to maintain the current law that requires individuals to pay 80% of their federal income tax in advance of April 15 through withholding or quarterly estimated payments. The standard was scheduled to rise to 90% for 1987 taxes, but the committee voted to keep the easier 80% rule in effect until next year.