President Reagan last night said that, under the administration's tax simplification plan, only corporations paying very low or no taxes would have tax increases, an assurance not contained in a plan submitted to the president by the Treasury Department late last year.
During the first press conference of his second term, Reagan said he had misunderstood a question posed to him earlier this month about provisions in the Treasury plan that would shift the tax burden from individuals to corporations. In an interview with the Wall Street Journal, the president had said that he would have to be convinced of the need to increase the corporate tax burden.
"When I answered that question . . . the other day, I misunderstood," Reagan said. "I thought they were telling me that the plan was actually going to get a great higher percentage from business. And I mentioned the fact that I did not want to do something that would interfere with our recovery or keep business from being able to expand."
Reagan said that when the Treasury plan says it will get more revenue from business, "what we're talking about is more revenue . . . from those elements of business that have not been paying taxes.. . . And we want to change that."
The Treasury plan, which would lower marginal tax rates for individuals and corporations while wiping out many tax breaks, would increase corporate taxes 25 percent in the next fiscal year. That would increase to 36 percent by 1990.
Many businesses now paying taxes contend that, in seeking to tax those that have legally escaped paying taxes through deductions and exemptions, the plan may cause those already paying to pay even more.
Reagan also reiterated his opposition to tax increases by saying that he would "have great difficulty accepting" a proposal by Senate Finance Committee Chairman Bob Packwood (R-Ore.) for a consumption tax, preferably on energy, to be included in the tax-simplification plan.
He also renewed his opposition to a value-added tax, which would work somewhat like a national sales tax. Reagan said a VAT "actually gives a government a chance to blindfold the people and grow in stature and size" and can be hidden from consumers.
In this regard, he said that "taxes should hurt in the sense that people should be able to see them and know what they're paying."
However, earlier in the day, Senate Majority Leader Robert J. Dole (R-Kan.) indicated that Senate Republicans may seek to extend the current 16-cents-a-pack cigarette tax and close some unspecified tax "loopholes" as part of their deficit-cutting effort.
In a speech to state legislators here, Dole drew a distinction between these proposals and a general tax increase, which he insists is "off-limits" for next year.
And in testimony before the House Budget Committee yesterday, Treasury Secretary James A. Baker III said he wasn't sure in what form the tax reform plan would reach Capitol Hill, but he said he hoped to have that answer in four to six weeks.
Dole was asked whether the Republicans were considering keeping the higher cigarette levy. He noted pressure in Congress for such action and added, "I would guess there will be some action on that before it expires." The cigarette tax was raised from 8 cents to 16 cents in 1982 but is due to fall back to 8 cents at the end of the current fiscal year, which would cost the Treasury an estimated $1.7 billion a year.
Dole was less specific on the issue of tax loopholes but made it clear he considered loophole-closing a possibility for next year.
"I hope when we say no tax increase, we're not ruling out action to close some of the gaping loopholes" in existing tax law, he said. "My view is that if someone is not paying taxes . . . that's a loophole that ought to be closed whether we have a deficit or not. That may be a tax increase for that corporation or that person, but it's also tax equity."