When the Reagan administration unveiled its draft tax-reform plan last month, leaders from both parties in Congress treated it as a pesky fly buzzing around while they concentrated on reducing the federal deficit. But as the Democratic House begins work on the issue this week, the concept of overhauling and simplifying the nation's tax code has taken hold on Capitol Hill.
One of the original skeptics, House Ways and Means Committee chairman Dan Rostenkowski (D) of Illinois, has thrown his considerable political weight behind the reform movement.
``To those who are preparing to stand against change, I have a warning: Don't underestimate the public demand for reform,'' he told a group of business leaders in New York earlier this week. In the ``great belt of middle-income earners,'' Americans feel the tax system is unfair, he said.
His endorsement, after earlier lukewarm statements, comes just as his committee opened hearings on tax reform, with Treasury Secretary James A. Baker III testifying.
Representative Rostenkowski is hardly alone on the reform bandwagon, which is fast piling up with lawmakers who support at least the idea of reform.
Senate Finance Committee chairman Bob Packwood (R) of Oregon, who sounded an alarm when he first glanced at some provisions in the Reagan administration's draft plan, appears to be warming to the idea.
``I think it would be very wise for us to use this year to dramatically lower the individual tax rate,'' he said last week at a press breakfast.
Senator Packwood predicted that a major push by President Reagan for tax reform could produce action by summer's end.
``Both sides seem to be edging very carefully to some kind of bill they can all agree with,'' says Christopher J. Matthews, assistant to House Speaker Thomas P. O'Neill Jr. (D) of Massachusetts. But he adds that members are leery of specifics on tax reform because ``these are mine fields'' that could easily blow up.
``I think there seems to be more of a quiet acceptance'' that tax simplification ``could really happen,'' says Rep. Byron L. Dorgan (D) of North Dakota, a Ways and Means member. He says there is much less agreement on details, however.
Rostenkowski compared writing details of tax reform to ``grabbing quicksilver.'' Even Mr. Reagan has backpedaled from parts of the Treasury's proposal.
The only agreement among reformers is that tax laws should be simpler, some tax shelters eliminated or reduced, and overall tax rates lowered. The current law is a rabbit's warren of exemptions, deductions, and tax credits aimed at helping various segments of the economy.
The public routinely tells pollsters that the existing system is unfair, but lawmakers point out that public opinion has not yet been organized enough to force change. ``The very specific opposition usually wins over the amorphous support, even though the amorphous support is the majority,'' Packwood said.
Rep. Robert T. Matsui (D) of California, who serves on Ways and Means, says, ``We're hearing quite a bit from lobbyists'' who are lining up to protect their favorite tax breaks, ranging from those for charitable contributions to life insurance and capital gains.
At the same time, he says he doubts the intensity of the tax-reform mood. ``I've been all over the state of California,'' he adds, ``and I have not seen a great deal of interest.'' His office has already stacked up 930 pieces of mail on the issue. And while the letter-writers often support the idea of simpler taxes, most insert a ``but'' and then ask to preserve tax breaks they use.
A group headed by conservative New Yorker Lew Lehrman is attempting to galvanize the public with television ads and a grass-roots effort for a ``lower, simpler, fairer income tax for working Americans.'' Even this group, however, is longer on generalities than specifics. For example, Mr. Lehrman has proposed eliminating tax breaks for capital gains, but his coalition, Citizens for America, has not.
Mr. Matsui says the tax-reform mood may perform a ``public service'' by forcing Congress to review tax subsidies ``that maybe have outlived their usefulness.'' -- 30 --