Is there a tax increase in US future?. Democratic leaders see new flexibility in Reagan tax stance
Washington — As lawmakers struggled to come up with a deficit-slashing budget last year, then-House Speaker Thomas P. O'Neill Jr. pledged not to support a tax increase unless President Reagan came out for one first. Members of Congress also groaned about the spending cuts that would result from the deficit reductions mandated by the Gramm-Rudman balanced budget law, though few dared suggest exceeding the limit. Some pleaded for a budget summit with the White House so that Congress and the President could iron out nettlesome budget issues behind closed doors.
The President, of course, did not oblige. Taxes were not raised. There was no budget summit.
By hook and by crook, Congress managed to come up with a budget for the current fiscal year. On paper it promised a $154 billion deficit, though the lawmakers passed a flurry of spending bills that will likely boost this year's deficit some $30 billion higher than the Gramm-Rudman deficit ceiling.
This year everything is different. By the end of the week, Democratic members of the House Budget Committee will have put the finishing touches on their version of a federal budget plan for fiscal year 1988 (beginning Oct. 1, 1987). Though it is expected to propose a $9 billion cut in defense spending and a $9 billion cut in domestic spending, their budget will not even pretend to hit the deficit target mandated by Gramm-Rudman.
Meanwhile, the new House speaker, Jim Wright (D) of Texas, has promised to fight for a tax increase - with the President's support or without it - and is working for a consensus among House Democrats to raise taxes by $18 billion a year.
Finally, the White House, eager to try approaches that will help it to recapture momentum lost in the controversy over the Iran-contra affair, is said to be considering a budget summit with key budgetmakers in Congress.
``It shows how far we've come, and how weak the President has become,'' says a senior House Democratic aide. Indeed, the recent tone of this year's budget deliberations seems indicative of the new political confidence many Democrats are enjoying as the Reagan administration wallows in controversy.
Many congressional budgetmakers have decided that $36 billion in deficit reduction is all that can be managed in one year. In fact, the Gramm-Rudman law calls for the deficit to be reduced in $36 billion chunks until the federal budget is balanced in 1991. Because the deficit reduction package for this year leaned heavily on one-time savings and bookkeeping tricks, however, $63 billion in savings and revenue increases in the next fiscal year have to be found in order to keep up with the Gramm-Rudman timetable.
Republicans on the Senate Budget Committee recently signed a letter urging compliance with the letter of Gramm-Rudman. But such pleas have fallen on deaf ears on the other side of the Capitol, where the House Budget Committee is expected to approve a fiscal 1988 budget proposal next week. Committee members say that proposal is likely to include a recommendation that tax increases of one kind or another be included in any deficit reduction package. Mr. Wright has suggested a tax on stock transfers as well as a delay in implementing the tax rates Congress passed last year.
But ``everything is on the table, I guess,'' says Rep. Dan Rostenkowski (D) of Illinois, the chairman of the tax-writing House Ways and Means Committee, who nonetheless opposes tampering with the tax rates set by last year's landmark tax reform legislation. Other suggestions have included an excise tax on cigarettes, beer, and distilled spirits - a proposal that White House officials have hinted the President might accept - as well as an oil import fee and a gasoline tax.
Although some House members are ``nervous about voting for a tax increase,'' says House Budget Committee chairman William H. Gray III (D) of Pennsylvania, ``the speaker will have the support he needs, when he needs it.'' As long as Reagan opposes congressionally-sponsored tax hikes, the outlook in the Senate is less certain. But Senate Budget Committee Chairman Lawton Chiles (D) of Florida says revenue increases will account for a third of the $36 to $40 billion in deficit reduction his committee hopes to find, thus forcing the Senate Finance Committee to come up with some sort of tax increase as well.