Reagan Delays Unveiling of Tax Reform to May 28

The White House announced Wednesday that President Reagan will not unveil his revised tax overhaul plan until May 28, a week later than had been expected, raising doubts about whether the Administration has ironed out key details of its proposal.

White House spokesman Larry Speakes said that Reagan has completed his work on the plan. The latest delay, he said, is in response to a request by Republican leaders in Congress that the tax reform announcement be postponed to avoid diverting attention from next week’s debate in the House over next year’s federal budget.

But Administration and congressional sources indicated that the White House also is running into problems making its new tax-simplification package bring in about as much revenue as existing tax laws.

“There are a lot of questions that are still up in the air,” said one Administration official. “It is still unclear how to maintain revenue-neutrality, given the number of tax breaks that we have had to put back into the plan.”

Like the original Treasury proposal, the new White House tax package would lower rates for individuals and corporations by eliminating a number of tax breaks, such as the deduction for state and local taxes.

Soften Impact

In an effort to make the new tax plan more politically palatable than the earlier one, Reagan accepted several changes that would soften its impact on business, charities and recipients of tax-free fringe benefits.

Beyond that, sources said, Reagan is seeking not only to increase the personal exemption from the current $1,040 to $2,000, as proposed in the initial Treasury plan, but to cut the maximum individual tax rate below the 35% level suggested in that proposal. The maximum rate is now 50%.

The White House has been struggling with ways to offset the resulting revenue loss.

At one time, congressional leaders had expected to receive the plan by May 1, and the latest delay raised fears among supporters that the White House is allowing the drive for tax reform to run out of steam.

Delay ‘Saps Cause’

“Delay saps the cause of tax reform and raises doubts about the President’s nerve,” said House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.).

Rostenkowski, who has been urging Reagan to disclose his tax plan for weeks, said in an interview that the White House delays will force his tax-writing committee to push the conclusion of its hearings on tax reform past Congress’ August recess and that he cannot promise to begin drafting a bill until well after Labor Day.

“They haven’t got their act together,” Rostenkowski said, “and I’m worried that every day of delay means that someone else will have the chance to come in the door and water it down.”

At the White House, one official said Reagan would still “like to get below the 35%” maximum tax rate, “but we may not be able to.” As for the personal exemption, he said, “the $2,000 is still the goal, but it is not clear how many years it would take to get there.”

Aid Poor

Raising the personal exemption to $2,000, whether it is done immediately or phased in over several years, would be designed to remove poor families from the income tax rolls and to cut taxes for many middle-income families that do not itemize deductions. Most of those families received only modest benefits from the major tax cuts enacted in 1981, which were aimed particularly at big business and the wealthy.

White House spokesmen, though, insisted that the delay in announcing the plan was not a result of any lingering uncertainty over key elements of the tax reform proposal. “The basic decisions are essentially made,” said Speakes. “There may be some additional refinement by the Treasury Department as they put the President’s decisions into the computers.”

Speakes added that Reagan had tentatively decided to announce his plan in a televised speech Monday until he received a request Wednesday morning from Senate Majority Leader Bob Dole (R-Kan.) and House Minority Leader Robert H. Michel (R-Ill.) that he delay the announcement. “The leadership thought it would be best that the House focus exclusively on the budget next week,” he said.

Reagan now plans to announce his tax revision proposal in a televised speech from the Oval Office the day after he returns from a Memorial Day trip to Orlando, Fla. In the week after the announcement, when Congress is scheduled to be on vacation, the President is expected to make other speeches on the subject, both in Washington and elsewhere around the country.