Taxes Split Democrats as Budget Talks Begin

Congressional Democrats began the budget-writing season in deep disarray Tuesday as their leaders fought over the source and size of possible tax increases to help close the huge federal budget gap.

House Budget Committee Chairman William H. Gray III (D-Pa.) said he is looking for new tax revenues and could support an increase in the gasoline tax, a new federal sales tax or a delay in lowering the rates for upper-income people.

An angry Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, chastised Democrats for being frightened of raising taxes. At least $18 billion in new revenues will be needed, he said in a speech to the Tax Executives Institute, “but don’t look for any profiles in courage” from Congress.

Votes in Question

House Speaker Jim Wright (D-Tex.) has called repeatedly for new taxes, and Rostenkowski said Tuesday that he would go along but doubted if Wright could “corral 216 more” to get a House majority. “Whether Wright has the votes is the big question,” Rostenkowski said. “If he does, he isn’t talking.”

Congress faces the difficult task of getting a combination of spending cuts and revenues totaling $36 billion to comply with the Gramm-Rudman law, which calls for a balanced federal budget by 1991.

With Democrats controlling both chambers of Congress, the final budget is expected to diverge significantly from the spending plan submitted by the White House for fiscal 1988, which begins Oct. 1.

Taxes appeal to Gray because he and other liberal Democrats are leery of making further cuts in domestic programs. “We’ve taken the sponge and squeezed it and there’s not much water left,” he said during a meeting with reporters.

Defense spending, which was not allowed to keep pace with inflation in the last two budgets, will be hit again, the Budget Committee chairman said. He predicted that Reagan “won’t like the spending cuts we’re going to do.”

Broad Spending Outlines

The resolutions being prepared by the House and Senate budget committees will provide broad outlines for federal spending. The individual appropriations committees will decide later how much is spent for each particular federal program.

The Democrats on the House Budget Committee have not been able to develop a tax and spending program in private sessions, and Gray said Tuesday that he has scheduled an open meeting of the full committee for Thursday, allowing members of both parties to struggle in public with the issue.

Rep. Vic Fazio (D-Sacramento) said that the Democrats “haven’t filled in the blanks” but predicted that the final plan will include $18 billion in taxes, $9 billion in defense cuts and $9 billion in reductions from domestic programs.

The Senate Budget Committee faces the same dilemma, handling the demand for spending after several years of relative austerity. “The pressure is building up,” Chairman Lawton Chiles (D-Fla.) said as the committee began its budget session Tuesday. “There are a lot of people out there who have some ideas how they would like to spend the money.”