House Accepts Modified Reagan Tax Package as Outline

The House Ways and Means Committee took the first step Wednesday on the long road toward congressional enactment of tax revision by agreeing to rely on a modified version of President Reagan’s plan as an outline for the proposed legislation.

Congressional leaders, pointing out that their current timetable will prevent the Senate from acting on tax revision this year, agreed that the best Reagan can expect is to receive a bill from Capitol Hill in the first few months of 1986.

“I don’t think it has any chance of getting through Congress this year,” said House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.), echoing earlier remarks of Senate Majority Leader Bob Dole (R-Kan.).

Meanwhile, Reagan took his campaign for tax reform back on the road, telling a crowd in Concord, N.H., that “the political Establishment back in Washington says you don’t care about these things. I say the Washington Establishment is out of touch with the people.”

Detect Little Support

Many leaders in Congress have said that they can detect no groundswell of support for overhauling the tax code, but House leaders remain committed to producing a bill this year so that Reagan cannot blame Democrats in next year’s election for derailing his proposal.

“Are we trying to put it through the House? The answer is yes,” said O’Neill, who met with Dole and agreed to end this year’s congressional session at Thanksgiving, leaving only enough time on the legislative agenda to act on such issues as trade, remaining budget matters and an increase in the national debt limit. “It’s taken us this long,” he added, “and it’ll take the Senate some time, too, I would imagine.”

The House Ways and Means Committee, voting 27 to 2 to bar the public, reporters and lobbyists from its deliberations, is expected to devote most of October to rewriting the tax code. The committee’s first formal session is scheduled for Sept. 26, and little serious work is expected to begin until Sept. 30.

The closed sessions, according to Chairman Dan Rostenkowski (D-Ill.), are designed to reduce the pressure from lobbyists representing special-interest groups and to permit members to talk more freely among themselves.

Compromise Predicted

California Rep. Fortney H. (Pete) Stark Jr. (D-Oakland), a senior committee member, said that panel members of both parties are committed to producing a tax bill and predicted the committee will reach compromises on such key disputes as the deductibility of state and local taxes and taxation of fringe benefits. The White House plan would end deductions for state and local taxes and would impose a modest tax on employer-paid health-care premiums.

Stark, who conducted an informal survey of several dozen taxpayers in his own district, announced that three-quarters of the California taxpayers who agreed to let an accounting firm calculate their taxes under the Reagan plan would receive tax cuts averaging more than $600 despite the loss of the deduction for state and local taxes.

The committee, in a key move, agreed to work from a list of tax options prepared by the staff rather than directly from Reagan’s proposal. The staff options, according to chief counsel Joseph Dowley, do not represent Rostenkowski’s own proposal but are designed simply to provide a starting point for committee members, who will be free to offer amendments of their own.

The Reagan proposal would cut the top individual tax rate from 50% to 35% and nearly double the personal exemption from $1,040 to $2,000, providing an average tax cut of about 7%. On the corporate side, most companies would pay higher taxes despite lower tax rates because of the elimination of such tax preferences as the investment tax credit.

No Question on Issue

Although Reagan repeatedly has stated that tax revision is one of the most important goals of his second term, he did not mention the issue at his televised news conference Tuesday night and he did not receive a single question on the subject.

Reagan’s speech from the steps of the New Hampshire State House marked the 16th time he has appeared outside Washington in support of tax revision since he announced his own proposal on May 28. It was the first time since taking office that he has returned to New Hampshire, which gave him a crucial primary victory in 1980.

Tom Redburn reported from Washington and Rudy Abramson reported from Concord.