How a Reagan man on the Hill is fighting tax boost
President Reagan's point man on taxes is John E. Chapoton, a tall, trim Texan , who says, ''The plan is no tax bill this year or next.'' As assistant Treasury secretary for tax policy, ''Buck'' Chapoton argues the administration's case before congressional tax-writing committees. And from a cavernous third-floor office in the Treasury Building, he plays a key role in developing the Internal Revenue Service regulations that actually carry out tax laws.
With Congress and the administration on a collision course on taxes, the job will require all of the negotiating savvy that Mr. Chapoton honed at Vinson & Elkins, one of Houston's most influential law firms.
The congressional budget resolution calls on the tax committees to raise $12 billion in new taxes in the coming fiscal year and a total of $73 billion by fiscal 1986. The House Ways and Means Committee is to begin hearings on revenue-raising measures early next week. Meanwhile, the President remains adamantly opposed to any new taxes before 1986. And recently, top administration economic officials called in the ranking Republicans on the tax-writing committees, Sen. Robert Dole and Rep. Barber Conable Jr., to stress that the White House stood behind the President on this issue.
Here is an edited text of an interview with Mr. Chapoton on the ongoing tax debate and other issues.
Does the meeting with Senator Dole and Representative Conable mean there is no possibility of your supporting revenue-raising measures focusing on increasing compliance with the tax laws?
That is it. We don't want a tax bill this year. . . . In the compliance area , if we had some grand ideas about having a dramatic increase in compliance, obviously it would be hard to turn your back on. We have looked at the compliance area a lot recently . . . and frankly there is not any major initiative we have come across that would have a significant revenue impact. . . . The plan is no tax bill this year or next.
Why should we wait until fiscal 1986, starting October 1985, when your proposed contingency tax would take effect, since deficits are going to be high in the meantime? What is the compelling economic argument?
The thought is that everybody agrees that increasing taxes would have a dragging effect on the economy.
More so than the deficits?
Yes, more so than the deficits. What we are talking about is staying with the standby taxes. . . . Those are conditioned on Congress getting spending under control. I see no reason to have tax increases if the funds are not going to be used to reduce the deficit.
You wouldn't agree with people who say the contingency tax is a political goner?
I admit the contingency tax was not well received in the Congress. One of my favorite lines is that it is the one thing on which we received bipartisan agreement. . . . (Congress is) facing the same thing we faced, and that is a concern about the out-year deficits, a concern about the effects of those deficits on financial markets. And hoping the problem will go away. . . . That argues for a standby mechanism to assure the financial markets that if the problem doesn't go away, action will be taken to bring the deficit under control.
To what extent will it go away because of a faster-than-expected recovery? Even if the deficit is lower, aren't you still going to need revenue-raising measures by 1986?
It looks likely that there will be revenue needed in 1986.
The argument you hear is that if he is reelected, the President will have to make a major shift in tax policy and move to raise taxes. Is this true?
Not everyone is sure the shift needs to be be made. And as things look rosier , it seems less (needed). We are getting less inclined to make the shift, which makes sense.
That would assume what?
Growth sufficient to have the deficit on a clear downward path. If the deficit in '86 were on a clear downward path and interest rates had stayed in line, a very key ''if,'' then there would be a serious question if you want to saddle the economy with a tax increase.
What are the best ways to raise new revenues, assuming more are needed?
. . . It is difficult. My starting point would be I don't want to increase marginal tax rates (the tax on the last dollar of income earned). . . . So then you have to look at other things. You have to look at the tax base (types of income taxed) or you have to go to an overhaul of the system.
As a practical politician, would you expect to see an overhaul of the system? In terms of the practicalities of drafting all new regulations, could that be done?
It could be done. I would not expect it, but it could be done. And we (at the Treasury Department) are doing work looking at a major revision of the system removing some of the biases that exist against saving.
You have been up on Capitol Hill talking about . . . fringe benefits and other subjects. Are these exceptions to your no-tax-bill preference?
I would put (forward) a couple of exceptions. One is action on that (fringe benefit) moratorium. (Congress has placed a moratorium on IRS efforts to tax certain fringe benefits. The ban expires in December.)
Another is action in the area of lease-backs and tax-exempts. (Some tax-exempt organizations have been selling buildings to private companies and then leasing the structures back. In effect the transaction is the sale of a tax break to the company.)
. . . And I think something should be done to revise the taxation of life insurance companies to remove the imbalance between stock and mutual companies. But it is much easier to state that problem than to cure it.
Associate IRS Commissioner Philip E. Coates said recently that individual taxpayers' voluntary compliance with the tax code fell from 91.2 percent in 1973 to 81.3 percent in 1981. Can that decline be reversed, given the political problems with withholding on interest?
I wouldn't say the difficulty in improving compliance is political. It is a very popular thing to make people comply with existing tax laws. The question is how do you do it. . . . I do not buy the idea that the sky is falling in compliance. I particularly don't buy it when I compare . . . our compliance with that of other countries in the free world. . . . We have good compliance in relation to them. We have a tax system that works.