Reagan to Lobby House on Tax Bill : Failure on Reform Could Sidetrack Issue for Years, His Letter Will Warn

President Reagan will send a letter today to all House members warning that if the House fails to approve a tax reform bill this week, the issue could be sidetracked for years, an informed official said Sunday.

The official, who asked not to be identified, indicated that the arguments Reagan will use in lobbying the members will parallel those advanced by Treasury Secretary James A. Baker III during a televised interview Sunday. The secretary said that Reagan needs House Republican support for a Democratic tax revision package, should an alternative GOP plan fail, because one of the two proposals will afford “a last chance” for realistic tax revision during his presidency.

“To walk away from it now would be a major, major mistake,” Baker said, referring to the tax reform issue.

Democratic Proposal

Questioned on ABC-TV’s “This Week with David Brinkley,” Baker stopped short of predicting that Reagan will actively lobby Republican congressmen to support the tax revision bill drafted by the Democratic-controlled House Ways and Means Committee. Rep. Dan Rostenkowski (D-Ill.), the committee chairman, had expressed hope Saturday that the President would do so.

And Rostenkowski said Sunday, also on the Brinkley show, that he expects the President to be “very forceful” in supporting his committee’s bill should the Democratic House defeat the GOP alternative.

The Washington Post reported in today’s editions that Reagan is planning to begin making calls today to Republican members of the House targeted as potential backers of the Ways and Means Committee bill.

The newspaper quoted White House sources as saying that the Reagan letter will declare efforts to overhaul the tax code “dead for several years” if the current effort fails.

“A vote against final passage will doom efforts to achieve real tax reform for the American people,” the newspaper quotes the Reagan letter as saying. “We must not allow that to happen.” He also will warn that failure to approve a tax bill will leave the existing code with inequities, complexities and “anti-growth” economic impact, according to the report.

‘Major Undertaking’

Baker, the Administration’s chief spokesman on the issue, said the Ways and Means bill has been “a major, major undertaking . . . with a lot of blood on the floor” and that Reagan, who has campaigned nationwide for tax revision, believes that “tax reform is dead if we don’t move something out of the House.”

Agreeing with other Republicans, including Reagan, that the Democratic bill is not perfect, Baker said: “We can either fix it up on the Senate side or the President doesn’t have to sign it.”

However, House Minority Leader Robert H. Michel (R-Ill.) said that presidential hopes for Senate changes in the legislation could prove vain.

Appearing on the same television show, Michel said: “We ought not to be so sure the Senate is going to give the President what he wants.”

Declaring that “we’ve done a better job” in drafting the Republican alternative to the Ways and Means bill, Michel said he could not vote for the Democratic measure under any circumstances. He predicted that the House vote on the Republican measure would be “a close one.”

But Senate Majority Leader Bob Dole (R-Kan.), speaking on NBC-TV’s “Meet the Press,” said that if the House approves the Ways and Means bill, “I think we can do a lot better (when it reaches the Senate). We can improve it.”

Dole predicted that the Senate would eliminate, in part, the deductibility of state and local income taxes retained in the Democratic measure, perhaps scaling the deduction back to only 50% or 25% of those taxes.

Neither of the competing House versions goes as far toward tax simplification as the original plan the Administration proposed a year ago. All three plans would increase corporate tax rates, but the Democratic plan proposes a top rate of 36%, as against 33% in the Republican and the original White House proposals.

Permits Some Deductions

The GOP plan also would end the federal deduction for sales taxes. It would permit continued deductions for income and property taxes.

However, Baker--in urging prompt House action on tax revision--stressed similarities between the Democratic and Republican plans. He said that both would set individual tax rates at the lowest level in 15 years--38% in the Democratic plan and 37% in the Republican plan--and would establish corporate rates at their lowest point since before World War II, in addition to exempting about 6 million working poor from the tax rolls.

Asked about the chances of a tax increase next year, Baker said: “The President is not going to permit tax reform to be used as a disguise for tax increase.”