Reagan makes his pitch for tax overhaul, touts GOP for proposing it

After a period of disengagement, Ronald Reagan is again weighing in on the issue of tax reform. With the Congress returning next week to negotiate the final tax-overhaul package, the President is making a strong pitch for the kind of measure he seeks and making sure that the political credit for tax reform redounds to him and his fellow Republicans.

Speaking in Dothan, Ala., yesterday, Mr. Reagan threw his weight behind the Senate version of tax reform as ``especially good'' for the American people. He noted that his administration first came up with a tax-reform proposal more than a year ago and that his tax policies have generated economic growth and restored confidence in the nation.

``Today we have the opportunity to carry this peaceful revolution through to its conclusion -- to lower taxes still further for most individuals, to help American business and to make our tax code fairer and simpler for all,'' he said in a luncheon speech before the local Chamber of Commerce.

In an effort to help shape the final bill, the President indicated his support for a top individual tax rate of 27 percent. His own proposal was 35 percent.

``Let there be any significant departure from the two low individual rates of 15 and 27 percent, and the top corporate rate of 33 percent that the Senate has already approved -- and somebody's going to have to do a lot of explaining,'' he declared.

The President urged the conferees to preserve the individual retirement accounts (IRAs), especially for taxpayers not participating in pension plans. He also stressed incentives for capital formation, removing low-income taxpayers from the tax rolls, fairness as ``an overriding goal,'' and help for the middle class.

This was the first of a series of public speeches that the President will make on behalf of tax reform, his major domestic goal in the second term. When the President first went out on the road to try to sell tax reform, the public was apathetic and the prospects murky. But tax overhaul, long advocated by Democrats, finally caught fire and garnered strong bipartisan support, thanks to the efforts of Sen. Bob Packwood (R) of Oregon, chairman of the Finance Committee, and Sen. Bill Bradley (D) of New Jersey, a member of the committee.

Throughout the congressional process the President remained personally aloof, having little to do with how the issues were finally resolved. The Packwood-Bradley success came almost as a surprise. But, say political observers, the White House now seeks to make sure that whatever package is finally passed is seen as the President's rather than Congress's achievement -- though Mr. Reagan praised the bipartisan coalition of senators ``who had the courage to lead a return to true reform.''

Touching down in Alabama for political reasons, the President gave a strong endorsement to Rep. William Dickinson and to Sen. Jeremiah Denton, who is facing a serious challenge in the coming election. But he devoted most of his speech to tax reform, thereby setting the stage for administration involvement in the coming negotiations.

Next week the House and Senate tax writers are expected to meet in conference to reconcile the bills passed by the two chambers. And while the President confined himself to generalities yesterday, the White House this week indicated the kind of changes Reagan would be willing to accept. White House chief of staff Donald Regan told reporters:

The President would be willing to compromise on several items if the lawmakers retain the Senate's 27 percent top tax rate for individuals. The House version has a top rate of 38 percent. The current rate is 50 percent.

To help pay for keeping the top rate so low, Reagan would accept a long-term capital-gains rate of 27 percent. But he would not favor making the rate effective as of the first day the House-Senate tax writers meet.

He would also consider accepting higher business taxes. The Senate bill would shift $100 billion from individuals to corporations over five years.

He would like to retain the $2,000 IRA deductions for taxpayers who are covered by company pension plans but are not yet vested and do not qualify for retirement benefits. The Senate bill eliminates the IRA deduction for all taxpayers covered by employer pension plans.

He hopes the House and Senate conferees would make the cuts in corporate and individual rates effective early next year, when the deductions would be limited, rather than midyear as in the House and Senate bills.

Indications are that a consensus on key elements of the final package is emerging among congressional leaders and the White House. But congressional observers warn that tough bargaining lies ahead to keep the tax rates low and find the money to pay for the cuts. Tracing steps on the path to US tax reform President Reagan is reelected with tax reform as his No. 1 domestic priority -- November 1980. Treasury Department recommends a plan for a modified flat-tax approach, reducing income-tax brackets from 14 to 3 and significantly cutting tax deductions -- November 1984. Treasury Department, with White House endorsement, proposes a second plan that would trim tax breaks less drastically than first plan -- May 1985 House of Representatives passes its version of the tax-reform bill -- December 1985. Senate approves its own tax-reform bill -- June 1986. House and Senate conferees (now being chosen) expect to start meeting next week to iron out differences in the two bills, including the treatment of corporate taxes and the top rate of taxation. Completed draft -- the conference report -- goes back to House and Senate for approval. Tax reform bill goes to President for signature, perhaps by Labor Day.