Reagan Insists Tax Plan Can Pass This Year

President Reagan, taking note of Monday’s deadline for filing income tax returns, denounced the federal tax code Saturday as a “mystery of legalistic gobbledygook and loopholes” and promised to try to change the system for next year.

The President dismissed, in his weekly radio broadcast, a widely held view in Congress that there is almost no chance of completing action on tax reform until 1986 at the earliest, largely because he has delayed for so long in submitting a specific plan.

“We expect to advance a proposal that can win bipartisan approval this year,” the President optimistically told his listeners. “With your support, this will be the last year the American people face today’s high tax barriers.”

Reagan lamented that “over the years the entire tax system has come to mirror Washington itself--a complicated, frustrating, unfair mystery of legalistic gobbledygook and loopholes never designed, it seems, to help everyday wage earners, only those who can afford high-priced attorneys and accountants.”

The tax reform Reagan has been talking about for nearly 15 months would reduce income tax rates but eliminate many popular deductions. The result would be a simplified tax form but no net revenue increase to the Treasury.

“Historically, tax reform has become a code word for tax increases,” Reagan said, “but our reform will not be a tax increase in disguise.”

In December, the Treasury Department, then headed by Donald T. Regan, who now is White House chief of staff, unveiled a proposed tax simplification plan that Reagan generally has embraced. But the plan never has been formally submitted to the White House and currently is undergoing revision under new Treasury Secretary James A. Baker III.

The White House now expects to have a tax plan ready for submission to Congress by late May, after the President returns from a 10-day European trip.

“We’ll propose reducing sharply personal tax rates, bringing the top rate down to 35% or lower and providing most Americans a tax cut,” Reagan promised his radio audience. “We’ll lower personal rates by broadening the (tax) base--in other words, eliminate the shelters that make tax avoidance legal. But longstanding provisions like deductions for your home mortgage will be maintained.”

Reagan himself, when he was California’s governor, once paid no state income tax because he was able to take advantage of tax loopholes for cattle raising. That was for the 1970 tax year. For last year, Reagan and his wife paid $147,826 in federal taxes and $30,200 in California state taxes.

Reagan said most Americans probably do not realize that business executives can deduct expenses “for seminars and conferences held on cruise ships.”

The President also complained that “too many economic decisions are being made for tax reasons alone, rather than in response to the marketplace. And that causes precious investment to be diverted from areas that could make the United States more productive and competitive in world markets.”

For example, Reagan said, the tax code has prompted a proliferation of “see-through buildings”--supposed office buildings with no interior walls because they have no tenants.

During 1983 and 1984, he said, “only about half of the increase in available commercial office space was reflected in rentals. The other half resulted in vacancies. You see, the tax benefits for investments in some kinds of real estate deals are so generous that being able to rent space may be secondary.”

He said “it’s time for change--sweeping change. And when we return from the Economic Summit (in Bonn) in May, we intend to move.”

In a broadcast response for the Democrats from Washington, Rep. Mary Rose Oakar (D-Ohio), secretary of the House Democratic Caucus, said that “an unfair tax system created by this Administration” has fostered corporate “tax freeloading.”

“Today, the President says he wants to revise the tax code,” Oakar said. “However, let us remember that it was his 1981 tax bill that created the flagrant loopholes and tax breaks for the corporations and the very rich.”

Declaring that the share of taxes paid by corporations “has fallen to the lowest level in memory,” Oakar said that in 1984 corporation taxes financed only 8.8% of federal spending, compared to 1960, when she said the corporate share was 26.3%. If corporations were again to pay taxes at the level of the 1960s, she said, “the federal budget deficit would be cut in half. . . . We could expect interest rates to finally come down and the economy would grow without the distortions that now threaten our future.”