Reagan May Not Back Higher Business Taxes : Corporations Encouraged by Signal in Interview That He Doesn’t Favor Increases in Treasury Plan

President Reagan has signaled his reluctance to increase the corporate tax burden, as his own Treasury Department’s tax simplification plan would do, and business groups Friday welcomed his remarks.

The President seemed to leave the impression in an interview published Friday that he was unaware that the corporate tax burden would be increased under the Treasury plan, sent to him in December. “I would have to be convinced of the need to do that,” he said.

Cut in Individual Taxes

In referring to the controversial proposal, the President noted: “I don’t think anyone has said, ‘Why, I buy this entirely as it is.’ ” The Treasury plan, which would reduce tax rates and eliminate tax breaks for both individuals and corporations, would cut individual taxes by $22 billion in the first year and raise corporate taxes by the same amount.

Business interests took heart from Reagan’s comments.

“Sooner or later, the President was going to find out that the Treasury wanted a massive redistribution of tax liabilities,” Paul Huard, vice president of the National Assn. of Manufacturers, said. “The Treasury was never particularly forthcoming about it.”

Richard Rahn, chief economist for the U.S. Chamber of Commerce, declared optimistically: “We’ve got a good chance now to change the tax plan.”

But the White House Friday attempted to play down the President’s comments, made Thursday in an interview with the Wall Street Journal. It released a full transcript of the question-and-answer session.

“It didn’t signal any change” in Reagan’s strong advocacy of simplifying the income tax, Marlin Fitzwater, a White House spokesman who specializes in domestic issues, insisted. “The President was trying to dance around” in answering questions because he has not made many firm decisions on the details of tax simplification and was attempting to avoid being specific, said Fitzwater, who sat in on the interview.

Reagan, reiterating in his responses a view that he has been expressing for at least three decades, said: “I’m a believer that one day we must recognize that only people pay taxes. . . . You can’t tax things; you only tax people.”

In his State of the Union address Wednesday, Reagan had praised the Treasury Department plan as “excellent,” adding that its “principles will guide the final proposal” that he will ask Congress to enact.

Political Appeal

The Treasury plan has considerable political appeal because it would reduce the average individual income tax bill by 8.5% in the first year and by an average of 7% over the first five years. However, the individual tax cuts would come at the expense of corporations, whose tax burdens would increase 24% in the first year and 30% over the first five years.

Although the Treasury plan would reduce corporate income tax rates, it would wipe out the investment tax credit and eliminate rapid write-offs of the cost of plant and equipment. The lost tax breaks would more than offset the lower tax rates.

Fitzwater said that Reagan expressed surprised in the interview when a questioner told him that the corporate tax burden would increase by 37% under the Treasury plan, as it would in the fifth year of the plan. “I haven’t even made an attempt to study (the plan) in detail that much to know that,” Reagan said.

‘The Central Issue’

Fitzwater insisted, however, that “he was aware that the corporate burden would go up. That’s the whole central issue.”

But another White House official, who asked not to be identified, said: “I don’t think the President has looked at the plan for two months.”

Whatever the context of or motive for Reagan’s remarks, they were welcomed warmly by business groups, which have been upset by the Treasury’s proposal. Corporate interests generally would prefer either of two major tax reform plans being pushed in Congress, both of which would leave the overall tax burdens of individuals and businesses unchanged.

John Albertine, president of the American Business Conference, which represents a group of high-growth firms, said: “I’m encouraged now he wants to make it a strong pro-growth bill.”

John Buckley, press secretary for Rep. Jack Kemp (R-N.Y.), co-author along with Sen. Bob Kasten (R-Wis.) of one of the major tax reform plans, said that the President’s remarks give a political boost to the Kemp-Kasten plan.