Reagan brings tax reform campaign to a close

As President Reagan winds up his fall campaign on behalf of tax reform, the issue remains a passive one for most Americans. There is a widespread feeling that the present tax code is unfair, and most Americans say they think the Reagan plan would remedy some of the inequities. But according to the latest polls, tax reform is not at the top of the public's list of concerns.

Nonetheless, as the House Ways and Means Committee hammers out a bipartisan tax-overhaul bill, the President has dutifully plugged away at trying to sell his plan. He has spoken in more than a dozen cities and towns since he announced the plan in late May. Many of the stops have been in the districts of congressmen who are writing the tax legislation.

Visiting Chicago yesterday in his final out-of-town trip before the November summit meeting, the President repeated the theme that lower tax rates for individuals and businesses will stimulate the economy. He also stressed fairness.

``America's Fair Share Tax is a plan for a growing, dynamic nation,'' he said at the suburban Kitchens of Sara Lee. ``Our very conservative, long-term estimates show our tax plan adding 3 percentage points to our gross national product. That translates into the equivalent of 4 million new jobs and from 600 to 900 extra real dollars of income for every American family.''

The President also chastised the national news media for not giving more attention to the issue.

Although the President has made tax reform a centerpiece of his second-term agenda, the politics and complexity of the issue appear to have ended any chances for passage of legislation this year. The House expects to have a bill by the end of 1985, but the Senate is not likely to tackle the issue until next year -- an election year, when it may prove doubly difficult to come to grips with politically controversial aspects of the reform.

Some Republican congressmen feel the White House has not been aggressive enough in pushing its own version of reform. ``At the moment my optimism is waning,'' Rep. Jack F. Kemp (R) of New York told reporters yesterday. ``The President is going to have to at some point weigh in on the process and push harder for those elements of tax reform that he feels strongly about or it's going to end up in chaos.''

The Republican Party is being too silent on the bill being hammered out by Rep. Dan Rostenkowski (D) of Illinois, chairman of the committee, said Mr. Kemp. The committee is moving away from some major elements of the Reagan package and it would be ``prudent'' for Treasury Secretary James A. Baker III to get back into the process.

One such key element is the President's proposal to raise the personal exemption to $2,000. The committee this week defeated the proposal, opting instead to raise the present $1,000 exemption to $1,500. For those not itemizing (the lowest income groups) an extra $500 was added to the standard deduction.

Aside from the personal exemption, Mr. Rostenkowski's committee has not tackled the large tax-reform issues, such as eliminating deductibility of state and local taxes; these will begin to come up next week. Other provisions approved by the committee include:

Repeal of the tax credit for political contributions but retention of the law allowing taxpayers to earmark $1 for the federal campaign fund for presidential candidates.

Revision of quarterly estimated payments to require estimated payments to total 100 percent of last year's liability or 90 percent of the current year's liability.

Tougher penalties for civil tax fraud, failure to pay taxes when due, and failure to provide required tax information.

The committee this week also voted to require the administration to provide more information on the Reagan plan under which millions of taxpayers would not have to file a tax return.

Congressional observers say it is not surprising that the President's travels have not sparked public enthusiasm for tax reform. ``I don't think anybody expected that as a result of his speeches the public would march on Washington with brass bands,'' says one committee aide. ``It's not a visceral issue.''

But it is thought that tax reform could have enormous political consequences for both Democrats and Republicans once a bill emerges. ``The President is now talking about abstractions,'' says the aide. ``But once you have a bill the dynamics will change -- it'll be like pulling a pin on a grenade. Then the President will have five times as much leverage.''

Political observers agree that prospects for tax reform remain good despite problems at the moment.

``The popularity of tax reform is diminishing as people become more aware of deductions they might lose,'' says William Schneider of the American Enterprise Institute. ``But as long as a bipartisan coalition is active, it has a good chance in '86. . . .''

The President is still pushing for action this year. ``Tax fairness will be America's Christmas present to ourselves -- and we shouldn't let any Grinch steal our Christmas this year.''