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35 Tax Foundation's Washington News 1 (1984)

handle is hein.tera/wingnews0037 and id is 1 raw text is: TAX FOUNDATION'S WASHINGTON- Fo April 20, 1984 vo.35 NO. 1 THE 1984 TAX AND SPENDING CHANGES: CRUCIAL CONFERENCE AHEAD Just before leaving Washington.for its Easter recess, Congress moved significantly closer to a temporary truce with President Reagan on taxing and spending policies. The formula for a compromise: A combination of relatively small spending cuts, plus tax increases that may bite more sharply than many have expected -- depending on the final wording of complicated new rules embodied in the 1984 tax revisions. Congress's aim is to reassure financial markets with a down payment on deficit reductions, while deferring more drastic action until after the November 6 elections. The vehicle: Budget resolutions that commit Congress to trim up to $133 billion from planned expenditures over the next three years and tax bills to raise nearly $50 billion in added revenue, for a total of up to $182 billion in projected deficit reduction. Decisions on specific spending cuts await legislative implementation in each House. The tax bills are ready for conferees. The House passed its tax bill on April 11. The Senate approved its bill on April 13. Their many differences will have to be ironed out by a Conference Committee, expected to begin work in early May. Crucial decisions on effective dates and other key points will be hotly debated, mostly behind closed doors. But some of the more important tax changes now in prospect can be summarized as follows -- TAX CHANGES FOR BUSINESSES Corporate Taxes. The Senate bill would prevent large companies from using the benetits of graduated tax rates. The House bill does not include such a provision. Tax Shelters. New and tighter rules would apply under both House and Senate bills to allocations of tax deductions (for expenses and losses) in partnerships and corporate arrangements set up to maximize tax avoidance. Promoters would have to register future shelter programs with the IRS. Real Estate Depreciation. The Senate voted to lengthen the depreciation period tor real estate from the 15 years authorized in the 1981 Tax Act to 19 years in 1985 and to 18 years starting in 1986, and to reduce tax credits for housing-rehabilitation projects. The House bill does not include these provisions. A bitter fight in Conference is predicted. Leasing. The sale of rights to tax benefits by government agencies, nonprofit organizations and businesses with tax-deductible losses, depreciation allowances and tax-credits -- often through sale-and-lease-back deals -- would be curtailed under both House and Senate bills. Pending deals are sure to be affected. If the Conferees make some of the changes retroactive, contracts

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