Will Compromise on IRAs, Capital Gains, Baker Says : Reagan ‘Willing to Give’ on Tax Revision

When Senate-House conferees settle down to reconcile differing tax reform bills, the Administration will be “willing to give” on its opposition to tax deductibility for individual retirement accounts and its desire for preferential rates for capital gains in order to protect the Senate bill’s lower rates, Treasury Secretary James A. Baker III said Sunday.

The conferees will begin work Wednesday, reminded by stacks of letters of grass-roots support for continuation of the deferment of taxes on IRA contributions and interest now allowed by the tax code. The House bill would retain IRA deductibility for most taxpayers, but the Senate bill would deny it to workers covered by company pension plans.

Baker, appearing on the ABC program “This Week with David Brinkley,” conceded that “there will be strong political support for doing something about IRAs” as an aid to middle-class taxpayers.

Proposes Two Rates

At the same time, he indicated that the Administration is ready to scrap the lower rate now permitted for capital gains to assure approval of the simplified Senate plan, which proposes only two rates, 15% and 27%.

“We would be willing to give on IRAs, we would be willing to give on capital gains, to preserve these low rates,” Baker said.

Appearing on the same program, Sen. Phil Gramm (R-Tex.) and Rep. Richard A. Gephardt (D-Mo.) both foresaw an early conference compromise. Gramm predicted that a tax bill will pass in time for President Reagan to sign it before Labor Day. Gephardt warned that extended delay could make final passage harder and said he hoped Congress would be free to “get the budget done” in September.

Gephardt, a member of the tax-writing Ways and Means Committee that will represent the House in the conference, declined to confirm speculation that the conference chairman will be Rep. Dan Rostenkowski (D-Ill.), the House Ways and Means Committee chairman. The decision has yet to be made, he said, adding that he had “heard some rumor” that Rostenkowski and Sen. Bob Packwood (R-Ore.), chairman of the Senate Finance Committee and principal author of the Senate bill, will serve as co-chairmen.

‘Bipartisan Effort’

“I think we’re going to have a bipartisan effort and a good effort between the House and the Senate,” Gephardt said.

The two lawmakers defended the tax bills enacted by their respective chambers.

Gramm said the Senate’s lopsided 97-3 vote for its version put Senate negotiators in a strong position. He suggested only two compromise amendments for the final bill. He predicted that one will “deal with IRAs, at least for middle-income citizens” and another will “preserve the full deductibility of sales taxes.”

Gephardt, defending the House version, which calls for four brackets ascending from 15% to 38%, said it would do more than the Senate bill to help the average family.

“I think the real issue . . . is what does tax reform do to the average American family as they sit down around the kitchen table on or about April 15 and figure out their taxes,” Gephardt said.