Nation: TAXES: THE R AND R BILL

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FOR more than a decade, tax reform has been the subject of more talk than action on Capitol Hill. Last week this tradition was reversed when the House took a long-overdue step toward granting the country's front-line taxpayers some R & R from the financial wars. By a lopsided vote of 394 to 30, the House approved a bill that would ultimately give citizens $9.2 billion worth of relief, by lowering certain tax payments, and the Treasury $6.9 billion worth of reform, by plugging various loopholes.

The 368-page bill is the first comprehensive revision of the U.S. tax code since the income tax was adopted in 1913. Despite its sweeping nature, however, there was little disagreement over its passage. Blaming a "misunderstanding," Ways and Means Committee Chairman Wilbur Mills defused potential liberal opposition to the bill by providing tax breaks for lower-and middle-income taxpayers left out of the measure as reported by his committee. Inclusion of those in the $7,000 to $12,000 categories will cost the Treasury $2.4 billion. Only three-quarters of the time allocated for floor debate was used. Constituent mail has been running so strongly in favor of the measure that few Congressmen were willing to face next year's elections without a safe position on the issue.

Striking Hard. The bill is a sound one. In addition to repealing the 7% investment-tax credit as recommended by President Nixon, it strikes at what most taxpayers regard, perhaps justifiably, as the very citadel of special tax privilege — the 27½% oil-depletion allowance. By cutting the allowance to 20% and reducing the depletion advantages for other extractive industries, the bill would enrich the Treasury by $400 million annually. Although oilmen plan to fight the cuts in the Senate, their wound could be worse. The bill leaves untouched the industry's far more valuable advantage of writing off oil-drilling costs as current expenses, rather than as long-term capital investments. The bill does, however, strike hard at the real estate industry. While leaving untouched the depreciation allowed on new residential buildings, it eliminates the accelerated depreciation provision for commercial property.

Also hit would be private foundations, some of which have led in creative efforts to improve the quality of life in America. In an attempt to crack down on organizations established to avoid taxes, the bill imposes a 7.5% levy on the investment income of all foundations. The measure could put a serious crimp in the activities of some of the country's most respected philanthropic operations, which now donate substantial portions of their income to private universities, museums and charities.