Panel Gives Tax-Overhaul Its Final OK; Reagan’s Endorsement Still Not Certain

The House Ways and Means Committee gave its official blessing Tuesday to its version of sweeping tax-overhaul legislation, after President Reagan indicated that he would not oppose the package but delayed a decision on whether to provide a crucial endorsement.

“I think he wants to keep the process alive. That’s the message I received, which would indicate he’s not going to reject the House Ways and Means package,” the option with apparently the best chance of passing the Democratic-controlled House, Senate Majority Leader Bob Dole (R-Kan.) said after an hourlong meeting between Reagan and congressional GOP leaders.

GOP Lobbying

At the session, House Republicans tried to persuade Reagan--who Democrats hope will be their plan’s most powerful ally--to endorse a GOP alternative that Republicans contend is closer to Reagan’s own. It transfers less of the overall tax burden from individuals to corporations than the alternative approved by the heavily Democratic committee.

Democrats insist that Reagan’s endorsement is crucial to the bill’s survival and warn that it will be the President’s only opportunity for achieving any of the tax-code changes that he has set as a top priority of his second term.

“It can’t be a tacit kind of endorsement,” Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) said. “He has to commit himself to help us on the floor of the House of Representatives” by lobbying Republicans to support the plan.

At the same time, House Minority Leader Robert H. Michel (R-Ill.) conceded after the meeting that the President must do more than just stand aside from the battle if tax reform is not to be doomed “for all time.”

Vote Scheduled

The House is scheduled to vote on the bill next week. If approved, it will be sent to the Republican-led Senate, where action is not expected until mid-1986 at the earliest.

Although Reagan has made “tax reform” a rallying cry, Rep. Trent Lott (R-Miss.), the House’s second-ranking Republican, said: “We don’t like the idea of being in the position of having to vote for a package of ‘tax reform’ just to move it along (to the Senate) if we think it is a bad bill.”

Some Administration officials have urged Republicans to support the bill with the promise that it would be changed by the Senate next year, but House Republicans have balked.

“The phrase, ‘The Senate will fix it up,’ is the moral equivalent of, ‘I’ll respect you in the morning,’ ” said Rep. Bill Frenzel (R-Minn.), an influential Ways and Means member.

Some Deductions Retained

The committee proposal would not lower overall tax rates as much as Reagan had asked and would retain some popular deductions that the President had sought to abolish. It has drawn fire from business organizations, who contend it would too heavily burden corporations and take away their incentives to invest.

The proposal, agreed upon more than a week ago, won official committee approval Tuesday on a 28-8 vote. Only five of the committee’s 13 Republicans voted for it, joining all the panel’s Democrats. Earlier, the committee rejected the GOP plan by a vote of 24 to 12, with Rep. Raymond J. McGrath of New York the only Republican opposing it.

The committee is expected to ask that the GOP package be put to a separate vote on the House floor.

But California Rep. Robert T. Matsui (D-Sacramento), a Ways and Means Committee member, said: “I can’t believe a single Democrat would vote for this Republican substitute. I don’t believe they are going to do very well at all.”

‘Muck Up the Water’

Echoing other Democrats’ criticism of the GOP alternative, he added: “I frankly think the Republicans don’t really support tax reform. They just want to muck up the water.”

The Republican proposal differs from the committee package in many ways. Among its key features is a limit on all itemized deductions except home mortgage interest. Taxpayers would have to add up all other itemized deductions, including those for state and local taxes, and could deduct only the first $1,000, plus 75% of the remainder.

Mortgage interest on both first and second homes could be deducted in full.

The GOP plan would set the maximum individual rate at 37%, contrasted with 38% in the committee bill. Corporate rates would fall over six years from 42% to 33%, contrasted with a steady 36% in the committee bill.