One-Time Tax Amnesty Finds Senate Support : Proposal to Collect Delinquent Levies Gains Backing as Lawmakers Stress Deficit Reduction

As the Senate Budget Committee prepared to begin sorting through its options today for producing a budget plan, support appeared to be growing Tuesday for a one-time tax amnesty and half the Senate went on record as setting deficit reduction as a higher priority than President Reagan’s tax-overhaul drive.

“People want revenues but don’t want any new taxes, so amnesty is gaining strength,” Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said.

Budget Committee members expressed confidence that ultimately they would produce a spending plan that would reduce the deficit enough in a second round by cuts to avoid triggering the far-reaching and painful automatic cuts required by the Gramm-Rudman balanced-budget law to take effect Oct. 1.

‘Truth or Consequences’

The automatic reductions will occur unless Congress ultimately can produce a budget that reduces the deficit to within $10 billion of the law’s $144-billion target. “It’s truth or consequences in budgeting,” said Sen. Ernest F. Hollings (D-S.C.), a committee member.

However, despite the potential consequences, Domenici conceded that no strategy is emerging for reaching that goal. “There has been no consensus,” he said. “It will be very difficult, in my opinion.”

Meanwhile, 50 senators--led by Sen. Rudy Boschwitz (R-Minn.) and including more than two-thirds of the Senate’s Republican majority--sent Reagan a bluntly worded letter saying that deficit reduction “should not only be the first imperative of Congress, but of your Administration as well.”

“Until a firm, definite budget agreement has been reached between Congress and the White House, we do not believe tax reform should be considered or debated by the United States Senate,” the letter said.

The move was widely seen as an effort to force Reagan to take a more active role in seeking a budget compromise with Congress by raising the threat that tax overhaul--which he has made the centerpiece of his second term’s domestic agenda--would be held “hostage” in a GOP-led Senate. The House passed its version of the tax bill late last year.

Despite the letter, Senate Finance Committee Chairman Bob Packwood (R-Ore.) told reporters that his panel plans to begin drafting its version of the tax bill on schedule, March 19.

The competing forces of tax overhaul and deficit reduction threaten to produce a fight over any new sources of revenue.

Senate Budget Chairman Domenici repeatedly has estimated that between $12 billion and $20 billion in new revenues will be needed to produce a budget that can win support from a majority on Capitol Hill and meet the Gramm-Rudman target. No congressional leader is advocating increasing income tax rates, but many have suggested that other measures, such as imposing an oil-import fee or eliminating tax breaks, are necessary.

‘Shopping List’

Domenici said his committee has developed a “shopping list” of potential spending cuts and new sources of revenue. One that is gaining increasing attention and support is the idea of offering a one-time amnesty to delinquent taxpayers who come forward and pay their back taxes.

“I have seen the results (of similar offers) in a dozen states, and it’s worked,” House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) said.

Internal Revenue Service Commissioner Roscoe L. Egger Jr., testifying before a House Ways and Means subcommittee, warned that a federal tax amnesty “would further undermine taxpayer morale by sending a clear signal to the American public . . . : ‘Don’t bother to pay now. We may forget you owe anything. Even if you have to pay tax, we won’t charge interest.’ ”

Sees Non-Compliance

“Amnesties can only reinforce the growing impression that the tax system is unfair and encourage taxpayer non-compliance,” he said.

The Treasury Department also has expressed misgivings about an amnesty and has rejected the idea in the past, but top officials have been looking into the possibility because of the interest in Congress in pursuing what many see as a relatively painless way to raise revenues.

Estimates of the revenues it would bring vary widely. The Budget Committee forecasts the one-time windfall at $8.6 billion.

“I don’t know where (such estimates) come from,” Egger said. “We have been unable to pin down any estimate I think is fully reliable.”