Democrats on the House Ways and Means Committee offered yesterday to give President Reagan half the 30 percent tax cut he proposed last February, but the White House turned them down and vowed to fight for the full Reagan plan.
In a closed-door caucus, the Democrats agreed on the outline of a two-year tax reduction plan that would provide for a 5 percent cut in rates Oct. 1, to be followed by an additional 10 percent in July, 1982.
The two-year "alternative," which also includes some provisions that would give extra tax relief to the poor, corresponds to the first two years of a three-year "compromise" tax cut that Reagan offered last week.
It also contains 14 additional tax cut provisions Democrats had proposed before, including an increase in the tax threshhold below which income is tax-exempt, a reduction of the "marriage penalty" and new tax incentives for saving.
Committee Chairman Dan Rostenkowski (D-Ill.), hoping to coax the administration into endorsing the Democrats' plan, took pains yesterday to stress the similarities between the two proposals.
"I don't know that it's so different from what the Republicans have proposed," he said of the Democrats' plan, on which aides said Ways and Means will begin formal work next Wednesday.
However, Treasury Secretary Donald T. Regan later told reporters that the president "will not go for" the Democrats' proposal and instead will push for passage of his full three-year plan.
And deputy White House press secretary Larry Speakes quoted the president as saying the Democrats' plan was "not good enough."
It was not immediately clear whether the administration would be able to build another coalition with conservative southern Democrats, who defected last month to give the president his victory on the budget resolution for next year.
White House strategists asserted they were confident the southerners would support their plan, but Democrats insisted otherwise. The southerners are scheduled to meet this morning to decide.
Rostenkowski said the Democrats' proposal would cost $41 billion in fiscal 1982, compared to $54 billion for Reagan's compromise plan, and would result in a $27 billion budget deficit, $10 billion less than under the White House bill.
The Ways and Means caucus capped a flurry of meetings between various participants in the three-week-old effort to work out a tax-cut compromise.
Besides a meeting between White House officials and the southerners, Secretary Regan also met with Republicans on the Senate Finance Committee. House Democrats caucused separately earlier, without any firm conclusions.
Reagan's most recent compromise offer called for a 25 percent reduction in tax rates over over 33 months, beginning with a 5 percent cut. Oct. 1, followed by 10 percent reductions on July 1 of each of the next two years.
The president originally had insisted on a three-year, 30 percent tax cut -- three consecutive 10 percent reductions -- but agreed to trim the first year's cut to 5 percent to hold down the budget deficit.
Along with the across-the-board cuts in tax rates, the Democrats' package includes:
Increasing the tax threshhold or "zero bracket amount," formerly the minimum standard deduction for all taxpayers, by $200 for single persons and $400 for couples, to new levels of $2,300 and $3,400 respectively.
Raising the earned income tax credit, which goes to low-income workers with children, to 11 percent of the first $8,000 earned, from 10 percent now, with the benefit phasing out gradually between $8,000 and $12,000.
Reducing the "marriage penalty" under which two spouses who work pay more in taxes filing jointly than they would if they were able to file as single persons.
Slashing the maximum tax rate on investment income to 50 percent, from the present 70 percent, a proposal that primarily would benefit higher-income taxpayers.
Reducing estate and gift taxes, a provision strongly favored by farmers, who have complained that inflation has pushed the value of their land and machinery far beyond current exemptions in inheritance-tax laws.
Liberalizing tax incentives for retirement savings, both under the Individual Retirement Account program and the similar Keogh plan for the self-employed.
A spate of miscellaneous tax breaks, ranging from a tax credit for research and development to a reduction of taxes of Americans working abroad, new tax relief for ailing companies and a new write-off for small business.
In explaining the Democrats' action yesterday, Rostenkowski said the group had declined to go along with Reagan's full three-year plan primarily because of concern that it would bloat the budget deficit.
House sources suggested, however, that in order to hold onto dissident southerners, Democratic leaders might be willing to provide for a separate floor vote on whether to tack on the third-year cut.
Members of the Conservative Democratic Forum, as the southerners' group is called, had indicated on Tuesday they were split between the two-year proposal and the Reagan compromise.
The Ways and Means proposal yesterday was formally endorsed by 21 of the committee's 23 Democrats, including two members of the group of southerners -- Reps. Ed Jenkins (D-Ga.) and Ken Holland (D-S.C.).
The two votes missing in the caucus were those of Rep. Kent Hance (D-Tex.), who left to represent the southerners in yesterday's White House talks, and Rep. William Cotter (D-Conn.), who is ill.
There was no immediate breakdown of precisely how much the proposals that the Democrats added would help tilt the bill's tax relief to the poor. Merely increasing the zero bracket amount, however, goes far toward that goal.
Rostenkowski conceded, however, that the 15 percent cut in tax rates was precisely the kind of proportional tax reduction that Reagan proposed -- a plan that Democrats previously had opposed as angled too sharply toward the rich.