Baker-Regan Job Swap May Boost Tax Reform

The prospects for major tax-reform legislation this year will grow significantly when White House Chief of Staff James A. Baker III and Treasury Secretary Donald T. Regan swap jobs, according to business executives and members of Congress.

As President Reagan’s chief of staff, they believe, Regan could give a big boost to the sweeping tax-reform package that his own Treasury Department produced in November.

When Regan met privately with his top Treasury aides Tuesday to inform them of the stunning job switch, he said: “The next White House chief of staff will be fully supportive of tax reform.” Everybody in the room laughed, “but we knew it was the truth,” said an official who attended the session.

And Baker, renowned as a skillful legislative negotiator, should be in a position at the Treasury Department to boost the program’s standing in Congress. Deputy Treasury Secretary R. T. McNamar pointed out that Baker already has become an advocate of the Treasury tax-reform blueprint.

“This should end any doubt the plan will go forward,” he said. “The principal author will now be the President’s chief of staff. The most skilled legislative strategist in the Administration will now be head of Treasury.”

Tax reform is expected to be a major theme in Reagan’s forthcoming inaugural and State of the Union addresses. But the provisions of the Treasury plan are still under debate in the White House, and Administration sources said Reagan will not send a detailed legislative plan to Congress until March.

The Treasury proposal, if approved by Congress, would reduce taxes for an estimated 56% of all individual taxpayers, reducing tax rates dramatically but also curtailing or abolishing many long-cherished tax deductions and credits.

But while the plan would reduce overall tax payments by individuals by 8%, it would make up the lost revenue by boosting business taxes by 24%.

Groups ranging from high-technology companies to charities have been protesting vigorously over the injuries they would suffer under the Treasury program. But Regan and his lieutenants have not been convinced of the need to alter their proposal.

In Congress, Rep. Bill Alexander (D-Ark.), a member of the House Democratic leadership, said that Baker, in moving from the White House to Treasury, “would bring a new credibility to the Treasury Department that would be very welcome.”

And in the business community, some opponents of the Treasury plan expressed fear that Regan’s aggressive style will bring a new urgency to tax reform.

“Bulldog Regan will make tax changes a higher priority,” said Jack Carlson, executive officer and chief economist of the National Assn. of Realtors, which has denounced the Treasury plan as likely to curb investment and homeownership.

Mark Melcher, head of the Washington office of Prudential-Bache Securities Inc., said that Baker is “a better diplomat, more pragmatic” than Regan.

The job swap by Regan and Baker will clearly boost the prospects for tax reform, said John M. Albertine, president of the American Business Conference, a coalition of mid-size, fast-growth companies. “Both men will hit the ground running,” Albertine said.

Under the Treasury tax plan, the progressive tax system, with rates for individuals ranging from 11% to 50%, would be transformed into a simple three-bracket system with rates from 15% to a maximum of 35%. A more generous personal exemption and standard deduction would enable a family of four to pay no tax on the first $11,800 of income.

Also contributing to this story were Times staff writers Oswald Johnston and Karen Tumulty.