Taxes loom large as Congress weighs revenue reform, budget. Budget battle builds in House over military spending, deficit

For months, congressional lawmakers have been executing partisan pirouettes across the stage of this year's budget process. Now Republican and Democratic budgeteers are about to bring their political ``pas de deux'' to the floor of the House of Representatives. This week the full House will consider a federal spending plan for fiscal 1987 proposed by the House Budget Committee on a party-line vote last Thursday. The budget activity in the House follows months of watching and waiting while senators agonized over a budget that would meet the $144 billion deficit target mandated by the Gramm-Rudman budget-balancing law.

But unlike the Senate, where a resolution for a $1 trillion budget passed with a resoundingly bipartisan vote, congressional observers expect a political slugfest in the House.

House Republican leaders, as well as the Reagan administration, oppose nearly every major element of the budget committee proposal. The panel's $994.3 billion plan holds military spending to $285 billion for fiscal 1987, some $16 billion less than the Senate version and $35 billion less than President Reagan sought in his February budget proposal.

Like its Senate counterpart, the House Budget Committee plan calls for $13.8 billion in new revenue, some $7 billion higher than the White House sought. But unlike the Senate plan, which would use most of the extra $7 billion to maintain defense spending, the House panel's proposal claims the added revenue would be used to cut the deficit to $137 billion, $7 billion more than the Senate proposal.

Like the Senate plan, the House proposal would freeze domestic spending at roughly current levels. Additional money is extended to certain health, education, and training efforts for low-income people. The White House proposed more extensive domestic-program cuts.

Rep. William H. Gray III (D) of Pennsylvania, House Budget Committee chairman, says his panel's budget plan ``would result in a lower deficit than the Senate plan, and achieves this by spreading the cuts more equitably. Spending cuts are divided almost equally between defense and domestic programs.''

On the House floor, Republicans will try to reduce the tax increase to the level proposed by the President, GOP staff members say. They also plan an attempt to raise the defense budget to at least $293 billion.

Yet Democrats expect broad support in their ranks for the budget proposal, which has even gained the support of Boll Weevil Southern Democrats, who normally favor higher military spending.

Many House Republicans privately admit the apparent agreement between the Senate and House Democrats on the tax issue may mean they are likely to have little influence on the budget-writing process. But by casting the tax increase in terms of deficit reduction, House Democrats have attempted to have their cake and eat it, too.

Democratic leaders have repeatedly said they would not come out for a tax increase without GOP support. With the proposal, Democrats can still claim to stand by that pledge.

At the same time, the extra $7 billion in deficit reduction has been cast with a careful eye to the eventual House-Senate budget conference, where the two sides will try to forge a compromise.

Democratic staff members privately say the added deficit reduction may be bargained away in negotiations. By the same token, talks with the Senate may see defense spending raised to $294 billion -- slightly less than a freeze in spending after inflation.

What will House Democrats get in return? Perhaps more funding for domestic programs, say a Democratic budget staff members. More important, they add, is the Democrats' opportunity to score points in this election year as the party in the front lines in the battle against rising deficits and wasteful military spending.