Senate Committee Rejects Tax-Cut Plan

The Roth-Kemp tax-cut plan, which Republicans want to sell as a major issue for the November elections, was rejected Monday by the Senate Finance Committee as a prescription for future inflation.

By a 10-8 vote the panel defeated the effort to lock Congress into individual tax cuts averaging about 33 per cent over three years.

"It's almost irresistibly attractive," Sen. Lloyd M. Bentsen (D-Texas), vice-chairman of the Joint Economic Committee, said yesterday. "But it would obviously overwhelm our supply capacity and lead to roaring inflation, increase consumer prices and run up interest rates."

Gas Pains

Sen. William V. Roth (R-Del.), who with Rep. Jack F. Kemp (R-N.Y.) wrote the bill, called it overdue tax relief for working Americans.

Roth and his backers contended the tax cut would be such an effective stimulant for the economy that it would produce more new tax revenue than it would cost.

Observers say the vote means the Finance Committee is likely to approve later this week a package of individual tax cuts that is nearly $4 billion larger than the similar bill passed last month in the House of Representatives. The Senate version is expected to target more relief on those making less than $50,000 a year than does the House bill.

Little Chance

Like the House bill, the version being written by the Senate committee would cut individual taxes permanently but only once, in 1979. However, there is general agreement that, barring a major improvement in the economy, Congress is likely to cut taxes again in 1979 and 1980.

By contrast, the Roth-Kemp measure would make one cut in 1979, another in 1980 and a third in 1981.

A family of four whose income is worth $20,000 at today's levels has seen its effective federal income-tax rate rise from 12.4 per cent in 1968 to 16.2 per cent today, Roth said. And by 1983, if current trends continue and the family continues to receive pay increases to match inflation, the tax bite will climb to 20.2 per cent, he added.

Dreaming

The Roth-Kemp plan, if instituted, would mean a $501 tax cut for a typical single person earning $10,000 a year who has deductions of 23 per cent of income once the plan reached full effectiveness (after 3 years); a family of four under the same conditions would get a $228 cut; the four-member family earning $25,000 would get a cut of $1,103.

Assuming no further cuts are made in 1979 and 1980, the House-passed bills would mean a $15 cut for the single person earning $10,000 per year, a $62 reduction per annum for the four-member family earning $10,000, and $232 per year for the family of four earning $25,000.