Senate Budget Offer Holds $7.3 Billion in New Taxes

Senate negotiators presented their House counterparts Friday with a budget proposal that would force President Reagan to accept $7.3 billion in new taxes if he wanted to blunt the cuts that Congress would otherwise make in his defense-spending request.

The higher taxes would also be used to boost spending for some of Congress’ high-priority domestic programs, including farm credit, education, health and law enforcement.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said his approach would amount to “playing hardball” with Reagan, who has insisted on preserving his defense buildup without raising taxes.

Almost Abreast of Inflation

If Reagan accepted the taxes, the plan would allow new defense spending authority to rise almost enough to keep military purchasing power abreast of inflation. Without the taxes, the military would suffer an after-inflation spending cut of roughly 2%, which amounts to a middle ground between the level approved by the Republican-led Senate and the lower amount passed separately by the heavily Democratic House.

All the alternatives would represent a dramatic reduction from the 8% after-inflation defense increase that Reagan initially proposed.

Additionally, if Reagan vetoed the taxes, the proposal would freeze spending for most domestic programs rather than allowing the selective increases approved in both the House and Senate budgets.

Defense-Spending Stalemate

Domenici’s plan was the first effort to break a stalemate over defense spending that has dogged two weeks of budget negotiations between the House and the Senate.

While House Budget Committee Chairman William H. Gray III (D-Pa.) said the proposal is “a positive step forward,” he expressed reservations about some of its details. He said Reagan’s vet1864396646House members.

Sen. Lawton Chiles of Florida, the Senate Budget Committee’s ranking Democrat and Domenici’s ally in drafting the proposal, acknowledged that unless Reagan approved the taxes, the plan was a “bare-bones budget” that would hit hardest at programs, such as education, that lawmakers believe are important to preparing the country to face the future.

‘Can’t See the World’

“The plan that we offer today pulls down the shades of the counting house so we can’t see the world tomorrow,” he said.

Chiles added, however, that it is preferable to the drastic cuts that would occur if Congress failed to pass laws that would slice the fiscal 1987 deficit to within $10 billion of the $144-billion target in the Gramm-Rudman law. That law automatically triggers across-the-board spending cuts if the deficit fails to meet its targets, and current tax and spending policies would leave the 1987 deficit at about $30 billion above the target.