Bipartisan Action Being Pressed to Speed Tax Reform

The Republican and Democratic sponsors of two major tax simplification bills are working toward a bipartisan approach that they hope will lead to an early compromise on overhauling the federal income tax system, the chief sponsor of the GOP measure said Tuesday.

Rep. Jack Kemp (R-N.Y.), speaking at a breakfast session with reporters, said that he and Sen. Bob Kasten (R-Wis.) plan a news conference today with Sen. Bill Bradley (D-N.J.) and Rep. Richard A. Gephardt (D-Mo.) to announce that they will revive their respective bills--both variations on the idea of a “flat tax.”

In seeking a compromise, Kemp said, the sponsors of the measures not only will consider consolidating their bills but will incorporate parts of the Treasury Department’s tax simplification proposal being considered by the White House.

All three tax reform proposals would enable the government to continue collecting the same amount of revenues but would lower the tax rates for both individuals and corporations by eliminating some popular deductions.

The sponsors of the two congressional bills already are “very, very close” to resolving their differences and all that remains is “some dotting of i’s and crossing of t’s,” Kemp said. He added that he has stayed in touch with Bradley on the matter on a weekly basis.

However, spokesmen for both Bradley and Gephardt said that, although the Democrats are interested in reaching a compromise--and will participate in today’s news conference--neither has been involved in actual negotiations with Kemp toward that end.

“There have been no negotiations at all; but, if Kemp is saying we are that close to agreement, it’s good news, because any movement has been unilateral on his part,” Gephardt’s spokesman said.

Kemp predicted that the spirit of bipartisanship would speed congressional consideration of a compromise tax bill, perhaps resulting in House committee hearings on the legislation as early as May.

Opposition in Senate

The efforts to speed consideration of tax simplification are opposed by Senate Republican leaders, who have said that they want to concentrate first on spending cuts in an effort to trim the federal budget deficit. For example, Republican members of the Senate Finance Committee have unanimously recommended delaying consideration of any tax proposal until Congress has dealt with the budget, according to the committee chairman, Bob Packwood (R-Ore.).

Indeed, “the point was forcibly made” to President Reagan during a session Monday at the White House that “many of the allies we need on spending cuts are going to be enemies on the tax bill,” Packwood said.

He said that Reagan did not respond to a request that he delay submitting the tax proposal, although outgoing Treasury Secretary Donald T. Regan was “quite amenable to the feeling (that) we had to go ahead with the spending cuts first.”

But the White House has indicated that Reagan will insist on earlier consideration of tax reform. White House spokesman Larry Speakes said that the Administration’s proposal is expected to be completed in March or April and to proceed “on a dual track” as Congress considers the budget reduction package.

Kemp, meanwhile, told reporters that Reagan plans to call for an “accelerated agenda” on tax reform in his Feb. 6 State of the Union message.

At the Treasury Department, spokesman Roger Bolton said that Treasury and White House officials are interested in working with members of Congress to work out any necessary modifications before Reagan submits the Administration’s tax plan to Congress.

According to Bolton, businesses have “lobbied since day one” to change several aspects of the Treasury plan, which was disclosed on Nov. 27. But Treasury officials are “not yet convinced changes are warranted,” he said, and would want “very solid evidence” that such alterations are needed to prevent damage to segments of the economy.

James A. Baker III, the newly confirmed Treasury secretary, has called the Treasury’s tax plan a starting point but has not yet indicated what changes he might propose.

Maximum Tax Rates

The Treasury proposal provides for a top tax rate of 35% for individuals and 33% for businesses, and the Bradley-Gephardt plan provides maximum rates of 30% for both. The Kemp-Kasten plan sets a top rate of 25% for individuals and 20% for corporations.

The most widely used individual tax break, the deduction for home mortgage interest payments, would remain untouched under the Bradley-Gephardt and Kemp-Kasten proposals. The Treasury plan would allow the deduction only for the principal residence; a deduction for mortgage interest on vacation homes--an increasingly popular investment for many middle- and upper-income Americans--would no longer be allowed.

The deductions for property taxes and state and local income taxes--an important factor for many taxpayers, especially in California and other high-tax states--would be eliminated under the Treasury plan. Residents of New York City, which has one of the highest local tax burdens, have been especially vociferous in protesting that aspect of the Treasury plan.

The Bradley-Gephardt proposal would retain the deductions for both property and income taxes levied by state and local governments, and Kemp-Kasten would retain the property tax deduction but eliminate the deduction for state and local income taxes.