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Tax Panel Asks Reagan Not to Meddle Publicly in Talks

July 18, 1986|TOM REDBURN and MICHAEL WINES | Times Staff Writers

WASHINGTON — The two chief congressional tax architects, finally sitting down to begin the real nitty-gritty of drafting a final tax revision bill more than 1 1/2 years after the Reagan Administration disclosed its first overhaul plan, Thursday suggested that President Reagan not meddle publicly in their complex negotiations.

"We hope that the President will not be commenting on the bill day by day, section by section as we go along," Senate Finance Committee Chairman Bob Packwood (R-Ore.) told reporters after he and House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) emerged from a breakfast meeting at the White House before the tax conference began.

The bargaining sessions, designed to work out the differences between the Senate and House bills, are expected to continue for at least a month.

White House officials said that Reagan, who urged tax writers to follow basic goals he had outlined last year, will have no trouble complying with their request. "We don't think that will be a problem," presidential spokesman Rusty Brashear said. "We intend to work constructively with the conferees."

There have been six major tax overhaul plans advanced, including Reagan's first proposed revision, but the 22 lawmakers chosen for the conference committee--11 each from the House and Senate--will make the final determinations on who will pay hundreds of billions of tax dollars.

In the conference's first substantial action, the lawmakers agreed to restrict the issuing of certain tax-exempt bonds immediately rather than waiting until completing work on the bill.

Although Rostenkowski and Packwood pledged to work in harmony, it was clear from the opening shot that conferees from both houses see stark differences between their approaches to tax revision.

"In their present form, neither bill could pass the other house," Rostenkowski said.

Rep. Charles B. Rangel (D-N.Y.) immediately went on the attack, arguing that the nominal 27% top rate in the Senate bill masks hidden higher rates that some affluent taxpayers would pay on part of their income.

Compromise Urged

Despite Rostenkowski's suggestions that House Democrats might be prepared to accept the Senate rate structure, Rangel said: "We come in at 38% and you come in at 27%, and equity would dictate that we have a compromise."

But Packwood quickly leaped to the defense of the Senate plan. "The thing we were trying to do was to get the rates as low as possible and to get rid of as many loopholes as possible," he replied. "And I think we've succeeded."

The Senate bill would compress as many as 15 current tax brackets--ranging from 11% to 50%--into two basic rates of 15% and 27%, although some high-income taxpayers would be taxed at 32% on some income because of a quirk in the way the brackets are figured. The House bill also has individual rates of 15% on the lowest income levels but then progresses up the income scale with rates of 25%, 35% and 38%.

The Senate would increase the corporate tax burden by about $100 billion over five years, providing the average taxpayer with a 6% tax cut; the House would raise corporate taxes by an estimated $160 billion over the same period, enabling individuals to receive an average tax cut of 9%.

Kills Fewer Deductions

But, even though the House bill imposes higher tax rates on the wealthy, it actually provides a greater tax savings to the rich because it does not wipe out as many tax deductions as the Senate version.

With so much at stake in the negotiations, it was not surprising that the spacious meeting room of the Ways and Means Committee was filled with lobbyists, staff members and reporters for the opening session.

Treasury Secretary James A. Baker III, noting that many of those in the room had worked hard to derail tax revision, said: "We all know an awful lot of folks who didn't want us to get here."

By the middle of the afternoon, as lawmakers began discussing the details of their two tax plans, nearly all the television crews had departed. The lobbyists, perhaps resigned to the inevitability of seeing a major tax revision become law, left empty seats scattered throughout the room.

House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) issued a reminder that not just dollars and cents will be won and lost in the bargaining. Each political party is also maneuvering to gain the greatest political advantage.

O'Neill, the nation's top elected Democrat, accused Reagan of "trying to run away with the credit" for tax revision, an idea which, he said, was first advanced in 1982 by Sen. Bill Bradley (D-N.J.), along with Rep. Richard A. Gephardt (D-Mo.).

Curbing 'Blind Pools'

On tax exempt bonds, Rostenkowski, Packwood and Baker issued a joint statement announcing immediate restrictions that would prevent cities and other government agencies from funding so-called "blind pools"--bonds that are issued without a specific project in mind.

"Smaller communities are the ones who will really be affected" by the decision, said Perry Israel, a specialist on tax exempt bonds at the San Francisco law firm of Orrick, Herrington & Sutcliffe. The statement puts an end to such bonds, he said, adding: "They've done it by fear."

Although staff members suggested that as much as $20 billion in such bonds had been issued in recent weeks, a tax-exempt bond specialist estimated that about $4 billion to $6 billion actually have been sold.

Dennis Holt, manager of special projects for the Public Securities Assn. in New York, contended that the rush over the last few weeks to issue such bonds was not to make money through investing the cash elsewhere, as Treasury officials feared. "Issuers by and large are going to market to beat a deadline," Holt said, "not to beat the law."

Staff writers Eleanor Clift in Washington and Debra Whitefield in New York contributed to this story.

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