House Panel to Draft Budget With Tax Increase

The House Democratic leadership Wednesday gave Budget Committee Chairman William H. Gray III (D-Pa.) the go-ahead to begin putting together a fiscal 1987 budget that would include new taxes, but they continued to insist on a guarantee of Republican support before they would bring such a plan before the entire House.

Sources involved in the negotiations said the plan, which the committee is scheduled to begin considering today, would reach the deficit target required under the new Gramm-Rudman law without the addition of taxes. Thus, the taxes, which would bring the deficit several billion dollars below the target, could be detached from the rest of the package and torpedoed if Republican support does not materialize.

Last week, the Republican-led Senate overwhelmingly approved a spending plan that contained $13 billion in new revenues, including taxes. Despite this indication of GOP support for higher taxes, House Democratic leaders fear that passing a budget without the backing of House Republicans could make them politically vulnerable to the old charge that they are the “tax-and-spend” party.

“I’m not going to slam the door” on the idea of taxes, said Rep. Trent Lott of Mississippi, the House’s second-ranking Republican. However, he said, the GOP stand “would depend on what else they’ve done. What have they done on defense?”

Opposition Seen

The committee reportedly plans to recommend $282 billion in new defense spending authority, which not only would deny Reagan the 8% after-inflation increase he requested, but would also represent a cut below the amount allotted this year. Lott said Republicans would oppose such a low figure.

In contrast, the Senate-passed budget plan, which would provide the Pentagon $301 billion, would allow defense spending to grow slightly faster than inflation.

The prospects for the proposal before the House Budget Committee are far from certain, regardless of whether the Republicans support it. Key Democrats worry that it may draw fire from liberals within their own party, who would oppose the restraint that it would put on social spending, while conservative Democrats may resist the defense cuts.

Other Reservations

Moreover, members of the House Ways and Means Committee, who would have to decide how to raise the taxes called for under the plan, have also expressed reservations about it.

Thus, for the time being, Republicans may simply “behave like the Maytag repairman: We just sit around and wait for (Democrats) to break down,” said an aide to the Republican leadership who asked not to be identified.

Gray told reporters that the Budget Committee may not finish its work on the budget until next week, which means that it could be two weeks before the House completes action.

The top priority is to create a plan that produces a deficit of no more than $144 billion. If Congress does not approve legislation by October to meet that target, the Gramm-Rudman law will force painful and wide-ranging automatic spending cuts.

Although the plan expected to be considered by the committee is projected to meet the target without more taxes, the additional revenues have the advantage of providing a margin of safety against the automatic cuts if the deficit outlook worsens between now and October, several committee members said.