The Times Poll : Majority of Taxpayers in Support of Reforms

Nearly two out of every three U.S. taxpayers believe that the federal government’s first priority should be reforming the tax system rather than trimming budget deficits, and a majority of taxpayers favor the Treasury Department’s controversial proposal to simplify the tax structure, according to the latest Los Angeles Times Poll.

But the nationwide survey also suggests that the Administration faces an uphill struggle in pushing tax reform through Congress because, although most taxpayers believe that the present tax system is unfair and needs drastic revision, they tend to describe tax breaks from which they personally benefit as equitable. They also endorse the present graduated tax-rate structure in which rates are lowest for the poor and highest for the rich.

Skeptical of Claims

Taxpayers also are skeptical about claims that the Treasury proposal would reduce tax cheating, encourage more persons to report their federal taxes and result in smaller tax bills for most individual taxpayers, according to the poll.

In fact, in one of the most revealing indications of the tough selling job ahead for the Administration on tax reform, more than one-third of those surveyed said they would probably end up paying more federal income tax if the Treasury plan were to become law, compared to only 11% who thought they would pay less.

Also compounding the Administration’s task is that, despite widespread discontent with the federal tax system, taxpayers are not in the mood for the kind of revolt that spawned California’s tax-slashing Proposition 13 and similar proposals elsewhere in the nation in the late 1970s.

Only 28% of respondents said they were angry about the amount of federal income taxes they or their families paid last year. An overwhelming 70% said they were satisfied or had no particular feeling one way or the other about the amount of federal income taxes they paid last year.

The survey results suggest that the nation’s taxpayers like what little they know about the Treasury proposal. But two-thirds of those surveyed believe that the current system of graduated tax rates was preferable to a modified flat-tax structure, as the Treasury is proposing, because they believe that any overhaul of the tax system should require upper-income taxpayers to shoulder a greater share of the tax burden.

On the other hand, 56% endorsed the idea of getting rid of most deductions as the Treasury proposal calls for.

But the survey suggests that the deductions they believe should be eliminated are ones from which they do not particularly benefit. For example, 74% of all respondents believe the currently allowed deduction for business entertainment expenses is unfair, but only 7% of them use this tax break.

Among taxpayers who do use it, 59% said the entertainment deduction was fair, compared to 41% who labeled it unfair. Among those who do not use it, 81% thought it was unfair.

The poll sampled a scientific cross section of 1,454 taxpayers by telephone between Jan. 19 and Jan. 24, a time when debate intensified over tax reform and deficit reduction as President Reagan was formally inaugurated for a second term and White House Chief of Staff James A. Baker III, his nominee to become the new secretary of the Treasury, began confirmation hearings on Capitol Hill.

In his Inaugural Address, Reagan endorsed the principles of tax reform embodied in the Treasury proposal without embracing any of the plan’s specifics. White House aides say the President intends to go into more detail on tax reform in his coming State of the Union message on Feb. 6.

Meanwhile, at the confirmation hearings by the Senate Finance Committee, Baker said that the President considers tax reform his chief domestic goal for his new term, overshadowing even reducing the deficit or keeping inflation in check.

But, in a sign of the obstacles ahead for the Administration, Senate Majority Leader Robert J. Dole (R-Kan.) said deficit reduction will be the “more pressing goal” for the Senate and gave scant odds for action on any tax reform this year.

The Treasury proposal, which was disclosed last November by Secretary of the Treasury Donald T. Regan, would scrap the current system of 15 graduated tax brackets running from 11% to 50% and replace it with a modified flat-tax structure with only three brackets: 15% at the lowest income levels, 25% at the broad middle-income level and 35% for the highest income levels.

The proposal also calls for the elimination or reduction of many cherished individual deductions and business tax breaks. For instance, the mortgage deduction for interest on a principal residence would be retained but a $5,000 ceiling would be imposed on deductions for interest on all other loans, including automobiles and second homes.

Battle lines already have been drawn in Washington over the proposal, with unions, big business and realtors--to name some of the most formidable challengers--vociferously opposed to the plan.

According to the latest Times poll, the public shares the Administration’s priority for tax reform, with 60% saying it should take precedence over deficit reduction. Despite the relative lack of anger over taxes, 56% of respondents said the federal tax code is unfair and needs substantial improvement, if not a fundamental overhaul.

The Treasury proposal was favored by 52% of those surveyed against 30% who opposed it--although nearly two-thirds of respondents admitted that they knew little or nothing about the plan.

Among the poll’s other findings:

--Taxpayers were nearly equally divided over two issues: whether business should pay higher taxes and whether current tax breaks for “smokestack” industries such as auto and steel should be retained.

--Skepticism over the Treasury proposal was high, with 62% of respondents saying they believe that special interests would be able to restore any loopholes that would be eliminated so that individual taxpayers would be worse off than before. Sixty-six percent said the proposal would have no impact on tax cheating.

--Thirty-seven percent of taxpayers believe that they would pay more taxes under the Treasury proposal, and 42% believe that they would pay about the same amount as now. Treasury Department analysts say that 56% of individual taxpayers would receive a tax cut under the proposal and that 22% would suffer no change at all in their tax payments.

The poll, conducted by I. A. Lewis, Times poll director, has a margin of error of 3 percentage points in either direction.

CH