White House Threatens to Torpedo Bill

The White House, complaining of too few spending cuts and too many tax increases, threatened Friday to torpedo Senate legislation designed to implement $55 billion in deficit cuts that Congress approved in principle three months ago.

White House Chief of Staff Donald T. Regan termed as “unacceptable” the bill’s extension of the 16-cent-a-pack cigarette tax and a variety of other clauses, including a $6-billion split of offshore oil revenue with California and six other states.

The warning set up a clash between Republicans who support at least some new taxes in the fiscal 1986 budget--including Majority Leader Bob Dole (R-Kan.) and Finance Committee Chairman Bob Packwood (R-Ore.)--and White House strategists who toe President Reagan’s line against both taxes and excess spending.

Prolonged Agonizing

It also promised to prolong 10 months of congressional agonizing over how much federal money to spend in the fiscal year that began Oct. 1.

The legislation attacked by the White House was approved by the Senate Budget Committee on Oct. 1 to bring the fiscal 1986 deficit down to the $172-billion target set by the budget blueprint that Congress adopted last July.

Regan, in a two-page letter to Dole, outlined “serious reservations” about three proposed taxes and a sheaf of spending provisions in the bill, which is expected to reach the Senate floor next week. “If some of the bill’s provisions are not deleted,” Regan said, “the President’s advisers will recommend that he not sign it.”

Dole declared: “It is clear they are not satisfied with the bill.” But one Senate aide expressed optimism that the differences could be resolved before next week’s Senate vote.

‘An Open Door’

“If the White House has alternative suggestions for revenue raisers, there’s always an open door for discussing them,” a Finance Committee aide said Friday. The Administration did not answer a September request for suggestions on the budget bill, the aide added.

In his letter, Regan said that the White House could not support a controversial plan to extend the 16-cent-a-pack cigarette tax, which is now due to revert to 8 cents in mid-November. The extension is backed by Dole and many other legislators as a painless way of raising $2.6 billion a year for the deficit-strained Treasury.

Reagan has opposed an extension in part because 17 states have voted to pick up the additional 8 cents worth of tax as a new source of state revenues when the federal levy falls.

The tax had been scheduled to revert to 8 cents on Oct. 1, but Congress the day before passed legislation postponing the date until Nov. 15. Reagan signed the bill but left open the possibility that he would veto a permanent extension of the 16-cent tax.

Superfund Tax Opposed

The White House also opposed a Superfund tax of 0.08% on the cost of manufactured and raw goods, which is expected to raise $5.4 billion over five years for toxic-dump cleanups. The tax previously had passed the Senate separately by an 86-13 margin.

The third tax opposed by Regan would slap an import fee estimated at 0.1% of the value of all imported goods. The fee would raise $200 million annually to retrain American workers displaced by foreign competition. Such programs previously have been funded from general revenues.

Regan’s letter also attacked the offshore oil clause, which would settle a seven-year dispute over the division of revenues from offshore oil leases that overlap federal and state boundaries.

$600 Million for California

House and Senate budget bills endorse plans to give the states more than 25% of the $5.8 billion-plus now in escrow, netting California more than $600 million by 1987. The White House has held out for keeping a larger share of the money and Regan stated that the Senate bill would cost the federal Treasury $6 billion to $12 billion.

In its only floor action Friday, the Senate passed, 76 to 9, a bill appropriating $53 billion to the Department of Housing and Urban Development, the Veterans Administration, the Environmental Protection Agency and other independent agencies.

The bill includes $4.2 billion for revenue sharing, contrasted with $4.6 billion last year. The budget approved by Congress in July had recommended eliminating the program of no-strings-attached aid for local governments next year.