The Carter administration yesterday appeared to back away slightly from its consistent position that it would not accept a tax cut any bigger than the $25 billion proposed last week by the president for fiscal 1979.
Under questioning at the Senate Budget Committee, Treasury Secretary W. Michael Blumenthal conceded that it would be hard to "argue that a $30 billion tax cut would be a disaster."
But Blumenthal told Chairman Edmund S. Muskie (D-Me.) that the administration had considered a range of tax cuts from $20 billion to $35 billion and settled on $25 billion as the optimum. Anything higher, he said, could cause a deficit that is too big.
Treasury officials emphasized later that Blumenthal was merely giving a straightforward response to a question from Muskie and was not inviting lawmakers to increase the tax cut beyond the $25 billion. Muskie, in questioning Blumenthal, cited a budget committee study that called for a tax cut in the neighborhood of $30 billion in fiscal 1979, which begins Oct. 1.
"It's one thing to say something isn't a disaster and quite another to say it's advisable," one official said. The administration remains adamant that the $25 billion tax cut is the desirable path, the official said.
The president's tax package includes $34 billion of tax reductions and $9 billion of tax increases which the administration calls "reforms."
Blumenthal told the committee that he did not know what the administration would do if the Congress turned down many of the tax "reforms" proposed by the president.
Congressional sources agree that the net size of the tax cut is likely to be larger than $25 billion because legislators will not enact many of the reforms asked for by the president - including elimination of the deduction of gasoline sales taxes and limiting medical deductions. Carter also wants to sharply reduce the deductions businesses can take for the entertainment and so-called three-martini lunches.
Blumenthal said he recognized that there would be some charges in the tax proposals, but said he felt sure Congress would approve most of them.
Sen. Ernest F. Hollings (D-S.C.) told Blumenthal the president would get about $3 billion of the $9 billion in tax revision he seeks.
The president has said that the $9 billion in tax charges are needed to partially offset the $34 billion of tax cuts - which include personal and business income tax reductions and elimination of federal excise taxes.
Blumenthal rejected a proposal from Sen. Henry Bellmon (R-Okla.) that the tax cut be delayed from Oct. 1 until Jan. 1 in order to add $9.6 billion in tax revenues to hold down the deficit.
"It would be an unwise thing to do," Blumenthal said. Now, he said, the effects of last spring's stimulus package is still itself felt. "The impact will begin to wane in the second quarter."
But he cautioned against thinking a tax cut bigger than $25 billion was needed. "We've starting with an economy in good shape and trying to offset the drags we know are there."
Blumenthal echoed a position taken earlier by Council of Economic Advisers Chairman Charles L. Schultze that if the administration felt futher for tax cuts were needed to keep the economy growing in the years ahead it would ask for them.
Blumenthal also refused to say which, if any tax "reforms" the administration preferred over another.