US Senate plods back into debate on 1987 budget. Tax-reform bill on agenda, too, but agreement looks doubtful

The wheels of Congress grind slowly, and when it comes to budget and tax reform, they grind uncertainly. That is evident as the United States Senate grapples this week with the twin money issues of budgetmaking and tax reform.

Yesterday the senators began their second full week of budget debate, attempting to bang together a federal spending plan for fiscal 1987. Their efforts have been hampered by divisions in Republican ranks over defense spending, cuts in domestic programs, and whether or not there should be a tax increase.

Meanwhile, the tax-reform process sputters along in the Senate Finance Committee. Amid growing doubts that committee members would be able to overcome their dissagreements and settle on a proposed new tax code, chairman Bob Packwood (R) of Oregon last week presented them with a radical and unexpected reform plan that would lower the top individual tax rate to 25 percent and eliminate all itemized deductions, including those for state and local taxes.

The plan itself, Mr. Packwood later explained, was intended to help reinvigorate the flagging tax-reform process and was ``not designed as a specific proposal.''

A stalemate had developed in the committee after panel members spent a month trying to rewrite a tax plan modeled on the broad outlines of the Reagan administration's plan. The political gridlock became so intractable that on April 18 Packwood finally suspended the committee's efforts to write a tax bill.

In order to get things moving again the Finance Committee chairman, in a closed session of the panel, asked members what would be needed to produce a bill rewriting the nation's tax laws. After the meeting he emerged with the new plan.

But Packwood admitted that it was possible a majority of the Finance Committee would refuse to go along with it. He suggested that he would support a variant of the plan which would allow some deductions while still holding the top rate at 25 percent.

Senate majority leader Robert Dole (R) of Kansas said yesterday that he doubted ``we're going to get a tax reform bill this year.''

``It's hanging by a thread,'' he told a US Chamber of Commerce meeting. Senate Republicans ``won't pass a tax bill that is anti-investment, antisavings, and antifamily,'' he added.

Congress has no such option with the budget, which by law is supposed to be in place Oct. 1, the start of the next fiscal year (1987). If agreement has not been reached on a budget that meets targets set by the Gramm-Rudman deficit-reduction law, automatic cuts are supposed to swing into place.

Nevertheless, the White House and the Senate continue to be at loggerheads over a federal budget for fiscal '87. A bipartisan majority has already turned down President Reagan's budget proposal and sent its own to the Senate floor for consideration. To stay under a Gramm-Rudman deficit ceiling of $144 billion, the plan proposes $18.7 billion in tax increases and chops the administration's defense total by $25 billion.

It has run into strong opposition on the Senate floor. Conservative Republicans, led by figures such as Sen. Phil Gramm (R) of Texas, are arguing for higher levels for defense spending, an increase in domestic spending cuts, and some bookkeeping changes that would reduce the deficit projected as well as the tax hike anticipated.

White House officials argue that a steadily improving economy will help reduce the deficit and eliminate any need to raise taxes or freeze defense spending.

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