Bulk of Reagan Tax Plan Wins Praise in House

House tax-writers today embraced President Reagan’s goal of a fairer, simpler income tax. But they peppered Treasury Secretary James A. Baker III with enough “buts” and “howevers” to raise questions about what type of plan will ever pass.

“It is the American people who want, and who deserve, a new tax structure,” Baker told the House Ways and Means Committee as his boss was delivering the same message to audiences in Virginia and Wisconsin (Story, Page 2). “They want simplicity and fairness--and they want it now.”

Members of the committee, who will write the House version of the plan that Reagan outlined on Tuesday, praised the bulk of the President’s proposals. But they questioned its treatment of married couples, the insurance industry, oil and natural gas, consumer interest, well-to-do tax dodgers and the deduction for state and local taxes.

Unfairness Seen

Some raised questions about whether the plan continues what they perceive as the Reagan Administration’s unfairness to lower-income Americans.

Rep. Andrew Jacobs Jr. (D-Ind.) said he paid $79,975 in taxes last year but if Reagan’s plan had been in effect, his tax bill would have dropped by $14,133. “It looks unfair . . . with respect to my fellow citizens,” Jacobs said.

Rep. Bill Archer (R-Tex.) complained that Reagan’s bill would deliver far less simplification of the tax system than had been promised. In some cases, it would be more complex, he added--noting that a person who now is able to deduct union dues would only be allowed to deduct dues and other miscellaneous expenses that together exceed 1% of income.

Loss of Deduction

Baker defended the plan to repeal the deduction allowed individuals for state and local taxes paid--an issue that could determine whether a major tax overhaul will be passed this year or next.

The Administration views the deduction as a subsidy of a few high-tax states, Baker told Rep. Thomas J. Downey (D-N.Y.) and is not concerned that the change--while allowing corporations to continue their deduction--would prompt many small businesses to convert to corporations.

The tone of the hearing was set by Rep. Dan Rostenkowski (D-Ill.), chairman of the panel. Reagan’s plan is monumental compared to present law, he said, and generally gets good marks for fairness, simplicity and halting abuses. But Rostenkowski said the bill the committee eventually approves must not shift the tax burden from one income class to another.

Baker said the Administration is flexible, within reason. “We will work with the committee--we will look at anything,” he promised.

But he rejected a few ideas advanced by committee members, including additional tax increases on the oil industry, retroactive tax increases on huge profitable corporations that paid nothing over the past few years, and re-imposing tax withholding on interest and dividends.