Mayors rally to fight Reagan tax reform. City leaders, meeting in Alaska, say the urban poor will be hurt by plan

Elmer Wolcott is mayor of Muskegon, a western Michigan town that once soared but now has slumped. Muskegon's fortunes are tied to the auto industry, which over the long term has been declining.

Mayor Wolcott says he thinks tax reform could help his town's residents. But he is concerned that they would be hurt by the tax plan proposed last month by President Reagan.

``I'm for simplification of taxes, closing loopholes for people richer than me,'' Wolcott said Saturday.

Like most of the 165 mayors gathered here for the 53rd US Conference of Mayors, Wolcott believes cities are the big losers under the President's latest budget and tax plans.

The mayors are forging a political attack on elements of the President's tax-simplification plan that they say would drastically impair the ability of cities to care for the needy and finance public construction.

Most troublesome to most mayors is the proposal to end the federal deduction for state and local taxes.

Ending those deductions would result in taxpayer demands for lower local taxes, says Mayor James McNulty (D) of Scranton, Pa.

Mayor McNulty characterizes the Reagan tax plan as ``an ultraconservative agenda under the guise of tax reform.'' Local governments would shrink if their ability to raise taxes or sell revenue bonds were decreased, as the President proposes, McNulty says.

McNulty says the administration is using tax reform to further its urban-policy agenda, which he says favors the suburbs and the Sunbelt at the expense of Eastern cities.

The mayors are also distressed by the President's proposal to eliminate the federal revenue-sharing program after 1986.

The Reagan administration defends its plan, saying the flow of federal dollars must be slowed if the deficit is to be controlled. In explaining the provisions that would end deductions for state and local taxes, administration officials cite what they call budget surpluses in the states and cities

It's the poor, needy, and underprivileged in the bigger cities who stand to suffer the most if the President's plan is adopted, many mayors say.

The disadvantaged are drawn to and remain in the urban centers because of the availability of services, says Mayor Joseph Sensenbrenner (D) of Madison, Wis., a co-chairman of a mayoral task force examining the President's tax reform proposal.

Milwaukee Mayor Henry Maier (D), evoked the race riots of the 1960s and predicted new riots will occur before federal officials recognize the importance of funneling funds into the inner cities.

It's a long way -- geographically and ideologically -- from Milwaukee to Sunnyvale, in California's Silicon Valley.

Sunnyvale Mayor John Mercer wants tax reform -- and he isn't sure it can work unless there's an end to deductions for state and local taxes. Mayor Mercer says he supports a tax reform that tightens exemptions for special interests, including the city.

Mercer sees cities benefiting from increased consumer spending made possible by tax cuts.

To mayors like Bill Collins (D) of Norwalk, Conn., the issue is not whether individuals will benefit but the extent city governments will suffer in the squeeze to cut federal spending while reducing taxes.

``We've got plenty of money for people to buy things; we're a little short on policemen,'' Mayor Collins says.

The 12-mayor task force on the President's tax plan is calling for reform that is ``simple, equitable, and progressive.'' The task force isn't asking that federal taxes be reduced.

The task force approved a resolution, to be voted on by the mayors on the last day of the conference Wednesday, objecting to provisions in the Reagan tax plan that would:

Eliminate tax exemptions for nearly all state and local bonds.

Limit charitable contributions, something the mayors say could jeopardize the services provided by churches and nonprofit groups like United Way.

Halt banks' deductions of costs incurred in buying and carrying municipal bonds.

End tax credits for rehabilitation and historic preservation.

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