Reagan Ready to Trade Deductions He Favors for a Top Tax Rate of 27%

White House Chief of Staff Donald T. Regan, signaling the Reagan Administration’s plan to play a public role during the upcoming House-Senate conference on tax revision, said Tuesday that the White House would sacrifice tax breaks favored by the President in order to cut the top tax rate for individuals to 27%.

Regan said the President would not object to ending low tax rates on capital gains, or to some restrictions on tax-deferred individual retirement accounts or on deductions for state sales taxes, if the revenue raised by those changes were used to set the top tax rate at 27%, about half of what it is now.

Opposes Time Lag

Regan said also that the Administration would consider accepting a larger tax increase on business than the $100-billion shift from individuals to companies included in the Senate bill over five years, if it helped to reduce rates. He expressed hope that the conferees would make tax-rate cuts effective at the same time as deductions are limited, rather than six months later, a time lag included in both the House and Senate measures.

The tax bill passed by the Senate last month includes a 27% top rate, but the House version has a top rate of 38%, and the current top rate is 50%.

“We like the 27 (percent rate) if we could keep it down there,” Regan said. “One of the reasons (the Senate bill) has caught fire is that 27%, the simplicity of it. The fact that it is so low has caught the imagination of many taxpayers, and they like it.”

Regan’s remarks, made to an invited group of reporters, were intended to call attention to a speech on tax revision that Reagan is to deliver Thursday in Dothan, Ala.

The speech and Regan’s remarks were planned partly to ensure that Reagan and the Republicans retain credit for tax revision. The Alabama speech will be the first of a series of public statements the President is to make on his No. 1 domestic priority as it faces its final legislative hurdle, the conference committee scheduled to convene next week.