Dole Doubtful on Tax Reform : Believes Congress Must Concentrate on Deficit

Senate Majority Leader Robert J. Dole (R-Kan.) said Thursday that there is only a scant possibility tax reform legislation will be approved by the Senate this year, insisting that, instead, Congress must concentrate its efforts on deficit reduction.

At a breakfast speech to the U.S. Chamber of Commerce, Dole was wholly bleak on the prospects for tax simplification. But, several hours later, he backtracked on his pessimistic comments, saying that tax reform is “very much alive” and quipping that he had spoken “before I had my coffee this morning.”

Nevertheless, Dole made it clear throughout the day that efforts to achieve a spending freeze to reduce the federal budget deficit should be the overriding mission on Capitol Hill. “We’re going to attack spending first,” he vowed.

After his morning speech, Dole told reporters: “I’m not trying to shoot it (tax reform) down--I’m just trying to be realistic and candid. . . . I don’t think we’ll see it this year.”

His position contradicted a statement Wednesday by Treasury Secretary-designate James A. Baker III that deficit reduction and tax reform will receive “equal priority” from the Reagan Administration.

However, Dole estimated that the Treasury Department’s sweeping tax reform plan--which calls for a 24% increase in business taxes and an 8% cut in personal taxes--would get only four votes in the 20-member Senate Finance Committee at this time.

Congress needs strong support from the business community to pass any deficit reduction package, yet business executives will not get behind the effort if they are “distracted” by arguments over tax legislation, Dole has argued. He and other GOP Senate leaders are eager to reduce the deficit, which has been projected at $230 billion in fiscal 1986, because they fear that interest rates might skyrocket as the Treasury borrows huge amounts to pay the government’s bills.

In his aggressive campaign to enlist corporate backing for deficit reduction, Dole has repeatedly warned audiences of businessmen that they could suffer financially if tax reform legislation is enacted. Under the Treasury plan, many provisions considered vital by businesses--including credits for purchases of new equipment and rapid-depreciation write-offs--would be eliminated.

Meanwhile, Sen. Barry Goldwater (R-Ariz.) was breaking ranks with conservatives and President Reagan by calling for a tax increase.

“We will have to look at tax rates that will have to be raised,” Goldwater said in a speech on the Senate floor.

‘Can’t Have a Recount’

In responding to Goldwater’s remarks, Dole said that a key theme in Reagan’s landslide reelection was a pledge to avoid tax increases, except as a last resort. “We can’t have a recount,” the majority leader said. “The election’s over. . . . We certainly haven’t reached that last resort.”

Goldwater, chairman of the Senate Armed Services Committee, had thrown a major obstacle Wednesday in front of Dole’s plan to cut $50 billion from the deficit when he announced that he would accept whatever increase Reagan asked for in defense spending. Dole has sought to freeze Pentagon spending, but Defense Secretary Caspar W. Weinberger is expected to ask for a 6.4% increase after inflation.

But Dole told reporters Thursday that he hopes to “work it out” with Goldwater and Sens. Ted Stevens of Alaska and John W. Warner of Virginia, two other key Republicans opposed to major restrictions on defense spending.

One source in the Senate Republican leadership said that Dole, impatient with Goldwater, plans a “very important meeting” with the three senators today or Monday that will “solve a lot of Barry’s problems. . . . He needs some facts. Something will break loose there.”

Dole has asked Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) and Budget Director David A. Stockman to attend the meeting with Goldwater, Stevens and Warner, the Republican source said.

“Every federal spending program must be restrained,” Dole said in his Chamber of Commerce speech. “There are no sacred cows . . . .”

Without curbs on defense, many senators would have trouble voting to trim Medicare or other popular programs, Dole said. “A number of solid, conservative Republican senators will tell you straight out that, unless defense is on the table, forget about it,” he noted.