GOP Senate seeks consensus on taxes in coming weeks
Millions of Americans who mailed in their income tax forms last week can now set the matter aside until next year. But in Congress, the wrangling over tax issues has just begun.
The Senate on Tuesday will take a test vote on tax withholding of interest and dividend earnings, an issue that has sparked more protest mail to Congress than any other in history. Both sides have dug in deep on this tax-enforcement measure, which will go into effect in July unless opponents can stop it.
Meanwhile the Senate Budget Committee is locked in a struggle over whether to raise revenues. In a rare show of unanimity, the Democrats are calling for $30 billion in new taxes next year. Budget Chairman Pete V. Domenici (R) of New Mexico would raise taxes less than $3 billion in 1984, slightly more in '85, while planning a sharp increase for '86, a proposal close to President Reagan's request.
But blocking the way to action is a handful of Republican senators who refuse to go along with any tax hike at all. These ''more-Reagan-than-Reagan'' hardliners so far reject even the President's proposals as they worry aloud about straying from the Reagan promise to reduce taxation.
Chairman Domenici this week must either win over these reluctant taxers, or else hunt for allies among the Democrats, a move that would mean setting a higher revenue figure.
''From being in the fray, I can tell you there is no strategy'' to close the rift in GOP ranks, a Domenici aide said late last week. But he added that Domenici is sending a message to his conservative GOP committee members to ''think what you're doing.''
The tax battle hits the core of political philosophies - whether to hold the line on taxes and force spending cuts or raise taxes to cut the deficit.
''The question is, do we want to govern with the basic guidelines and goals that we had in 1980,'' said Senate budget committee member Bob Kasten (R) of Wisconsin, after casting votes against all tax increases. ''Or do we now, for pragmatic, political considerations, abandon those goals and principles?''
''We are not willing to turn our backs on the basic goals,'' vowed Kasten, who is also the point man in the battle to repeal tax withholding on interest and dividends.
Another hardliner on taxes, Sen. William L. Armstrong (R) of Colorado, went so far as to defend the somewhat tattered theory of supply-side economics during the budget sessions last week, and placed on the table in front of him a small card with the reminder ''Stay the course.''
The message hardly convinced the senator next to him, Nancy Landon Kassebaum of Kansas, a moderate Republican. ''At times that isn't possible, nor should we, '' she said during a budget committee break.
''It's a different economic and political climate,'' said Senator Kassebaum, who argues for a middle course on taxes and spending. ''Everyone would agree that there is no way you can possibly make the spending reductions'' needed to bring down the deficit.
The Senate Budget Committee will try again this week to find a consensus on revenues. For taxpayers, the final figures agreed on by the full Congress will decide the fate of the 10 percent tax rate drop set for next July 1. It will also affect the future of tax indexing, a device put into the law to keep taxes from rising automatically with inflation.
As of now, the 10 percent tax cut appears to be holding. Although House Democrats approved a $30 billion target for tax increase for 1984, their own tax-writing committee has indicated that it will go only as high as $13 billion, including $5.2 billion already approved in social security rates.
Many in Congress appear to buy arguments in favor of the two reforms, although they mean a huge drop in US revenues.
As Sen. Alan K. Simpson (R) of Wyoming told a breakfast meeting last week, ''The July 1 tax cut is very important because the first two cracks (a Reagan administration tax cut of 5 and 10 percent during the two previous years) took care of the greater income taxpayer.'' This one is ''for the guy and his wife'' who together earn about $24,000, he said, adding that the tax cut will inject billions of dollars to ''fuel up'' the economy.