GOP Senator Fears Tax Hike for Middle Class

The Republican head of the Senate Finance Committee, key to the passage of any tax reform, charged today that contrary to White House claims, President Reagan’s plan appears likely to raise taxes for much of the middle class.

Sen. Bob Packwood (R-Ore.), in a surprise announcement, said he believes the Treasury Department already is re-examining the proposal to determine whether changes should be made so that it would not harm middle-income taxpayers.

“If their reassessment confirms what I think it may, they will probably themselves suggest some changes in the plan, especially in the two-earner, middle-income family,” Packwood said.

Some Suspicion Noted

He stressed that he does not believe tax reform is dead, but noted “there is a healthy suspicion that this plan does not reduce taxes, as announced, for those in the $20,000 to $60,000 income range.”

Packwood said he became aware that Reagan’s plan could hurt the middle class from a study being conducted by the Oregon Treasury Department. He said that report will be sent to the U.S. Treasury Department.

The senator said he believes that when Treasury developed the tax plan, the Administration was “honestly convinced that the overwhelming bulk of middle-income taxpayers were helped.”

“I think what the Treasury Department may now find on further examination is that a great many more middle-income taxpayers are adversely affected than they thought,” he said.

Relief Promised

Packwood’s position reflects frequent statements of Democrats in the House Ways and Means Committee, who have vowed to change Reagan’s plan to provide more relief to the middle class.

Despite the Democratic position, the Administration has not given any indication that it is willing to change.

Packwood, however, said he thought changes would be made. “I don’t think the President wants to increase taxes on the middle-income taxpayer, or a fair portion of the middle-income taxpayer,” he said. “Part of tax reform is lowering the taxes on them.”

He said the Administration should study reinstating the marriage penalty deduction, which it has targeted for elimination. He did not address the issue of childless couples, who would not benefit much from the proposed $2,000 personal deduction.

Asked whether it should also reinstate the sensitive deduction for state and local taxes, which Reagan also wants eliminated, Packwood said because of the large amount of money involved in that provision, he did not see how a tax reform plan could pass without its being dropped.