Democrats Press for Tax Increase in Budget Plan

House and Senate Democrats, who have been feuding for weeks over military spending, Wednesday announced a compromise budget resolution that would provide increased defense outlays if President Reagan accepts $65 billion in tax increases over the next three years.

The Democrats are preparing for a tough struggle with the President, who has indicated that he will campaign vigorously against the budget proposals of the Democratic-controlled Congress and has attacked the legislators as reckless spendthrifts. He also has promised to veto any legislation that raises taxes.

“Here is a budget that provides for less spending, more defense and pay-as-you-go,” Sen. Majority Leader Robert C. Byrd (D-W.Va.) told a news conference. “We’re starting to tear up this Administration’s credit cards.”

The Democratic plan offers a dilemma for the White House by linking defense spending, which the President favors, to higher taxes, which he strongly opposes. “Whether there will be a higher military spending level is left for the President to decide,” said Rep. William H. Gray III (D-Pa.), chairman of the House Budget Committee.

Democrats Show Unity

The top Democrats from the House and Senate joined in a show of unity at the news conference, predicting that the budget resolution agreed upon Wednesday will win approval in both chambers of Congress. The resolution had been stalled because the Senate insisted on more money for the military than the House had approved.

The budget resolution will be formally signed today by House and Senate conferees, the Democratic leaders predicted, with final votes of approval on the House and Senate floors next week.

Although the top Democrats were confident Wednesday that their package would be approved by a majority of the budget conferees, some House liberals may refuse to sign the conference report. A rebellion among House conferees had torpedoed a preliminary agreement earlier this month.

“Based on preliminary discussions, this budget will fly with our conferees and with the House,” Gray said.

The budget plan announced Wednesday would combine $19 billion in tax increases with $18 billion in domestic spending cuts for the 1988 fiscal year, which begins Oct. 1. This budget resolution sets the overall limit and broad general categories for federal spending.

$130-Billion Deficit

The $1-trillion budget would have an estimated deficit of $130 billion, less than the deficit of $175 billion anticipated for the current fiscal year.

The budget resolution is a guide to spending. Money for individual government programs is approved later by congressional appropriations committees.

The compromise plan disclosed Wednesday would give the military $296 billion in spending authority, compared with the original figures of $301 billion by the Senate and $288 billion by the House.

Both chambers of Congress want to spend less than President Reagan, who called for $311 billion for the military in his budget.

The Democratic plan offers him two choices. If he refuses to accept higher taxes, he gets a military budget frozen at this year’s level, $289 billion. If he agrees to the tax hike, he gets $296 billion.

Rejects Raising Taxes

However, the President totally rejects the notion of raising taxes. “The only thing worse than deficits is high taxes,” he told Senate Republicans Tuesday during a personal appearance on Capitol Hill, urging them to stand fast against Democratic efforts to raise revenues.

In his nationwide television address Monday, the President promised that he would take his case to the American people, crusading against any efforts to raise taxes.

The proposal calls for $19.3 billion in new taxes in fiscal 1988, $23.3 billion in fiscal 1989 and $23.5 billion the following year. It does not specify exactly how the money would be raised, leaving that task to other congressional committees.

The Democrats may have difficulty putting together the package of more than $19 billion in tax hikes for fiscal 1988, which begins Oct. 1. The leaders of the tax-writing committees do not want to tamper with the individual and corporate rates established under the 1986 tax reform law.

If tax rates are not raised, the likely sources of revenues would be increases in federal excise taxes, such as the levies on gasoline, cigarettes, liquor, wine and beer. Such increases would be controversial, with many Democratic legislators worried that these taxes would hit hard at middle- and low-income voters.