The Carter administration's already-foundering tax-revision effort received a serious blow yesterday as congressional liberals - regarded as the heart of Capitol Hill support for the package - asked the President to cut it back.
In a meeting with W. Michael Bluementhal, the Secretary of the Treasury, liberals on the House Ways and Means Committee urged that Carter slash the package to only a handful of "reform" proposals "that can be considered easily by Congress."
They also advised him not to seek an end to the special tax treatment of capital gains - a step the White House considers the centerpiece of the whole Carter package. Capital gains are the profits from the sale of securities or other assets.
The session marked a setback for the administration, which had been counting on the liberals in the Ways and Means Committee to provide the nub of congressional support for the tax-revision measure.
Without the support from liberals, Carter has virtually no chance of getting a comprehensive tax bill through Congress. The Ways and Means Committee already was expected to alter the package significantly, and further changes were likely in the Senate.
The Ways and Means session was private and closed to reporters. However, several present at the meeting said the liberals made these points:
The President should scrap the comprehensive proposals outlined in Treasury memos recently and instead send Congress a visibly more modest package containing a few basic changes that are not likely to be controversial.
Carter should not seek to eliminate the existing tax preference for capital gains, in which only half the profits from securities and other assets are subject to tax. The liberals joined conservatives here in branding the proposal too radical.
Instead, the President should concentrate primarily on reducing taxes for individuals and business and on "tax simplification" a term the liberals defined as making it easier for the average taxpayer to compute his tax return.
In deciding on how to cut taxes, the administration should take into account the impact on individuals of other tax measures it has proposed, such as the social Security and energy-tax increases.
The liberals were just as forthright about the issue in interviews later. Rep. Charles A. Vanik (D-Ohio), a longtime "tax reform" advocate, even questioned whether the tax package should be unveiled at all.
"I think the American people will understand the need for concentrating on first things, like the economy, first," Vanik said later, "What this country needs is a little tax tranquility now. We've already had a lot of changes."
And Rep. Abner Mikva (D-Ill.), another key liberal, argued the proposal to end special treatment of capital gains would not be a "real reform." He suggested Carter concentrate on such proposals as a move to crack down on "expense-account living."
There was no immediate reaction from the administration. Several participants said Blumenthal listened intently, but did not reply to specific suggestions. "He was mainly there to hear what we had to say," one law-maker said.
The recommendations of the liberals generally followed the views expressed last week by Rep. Al Ullman (D-Ore.), chairman of the Ways and Means panel, who urged Carter to pare back the tax package and scrap plans for a tax cut.
Administration officials had regarded Ullman's remarks as primarily reflecting the position of moderates and conservatives on the panel. Yesterday's session showed there was little support for the tax package among liberals as well.