A device is now being wired to boobytrap President Reagan's three-year tax cut plan with a Democratic alternative that would cut individual income taxes over the next four years -- but with the last two years tightly triggered to economic performance.
Rep. Dan Rostenkowski, chairman of the Democratic-controlled Ways and Means Committee, has not said yes to this proposal. But he has not said no. mRostenkowski is drafting a tax bill with only two years of individaly tax cuts skewed to lower-middle-income groups. He is working in the shadow of Ronald Reagan's stunning victory over the Democrats in the budget fight.
The latest Democratic nightmare is the prospect of yet another Reagan sweep, this one substituting his three-year, 25-percent marginal rate cut bill for the Rostenkowski two-year bill on the floor of the House. Danny Rostenkowski has more to lose than anyone else if, as now seems probable, Reagan rolls him on the floor in the first test as chairman of the tax-writing committee.
The four-year tax cut, with the last two hinged to economic performances -- budget deficits, inflation and interest rates -- is tailored to deprive Reagan of what one House Democrat calls an unbeatable argument: a tax cut covering three years looks a lot better than one covering only two years.
Prime mover of the proposal to add a third -- or a third and fourth -- year to Rosetenkowski's two-year tax cut is Rep. Ed Jenkins, a conservative "boll weevil" Ways and Means Committee member who is certain to stay with Rostenkowski in the tax cut shoot-out on the floor late this month.
Jenkins argued the plan eloquently last week in a closed-door caucus of committee Democrats and picked up impressive support. Rostenkowski said nothing. The Georgia conservative, who stuck with the Democrats in their defeat on the budget June 25, definitely will offer the extended tax cut plan to the Democratic caucus when the committee gets back to bill-drafting late next week.
Last month Georgia Rep. Elliott Levitas, an assitant Democratic whip with modest supply-side credentials, wrote Ways and Means Committee Democrats that the multi-year plan "would eliminate the argument" Reagan is certain to make that three years of tax cuts are better than two. "The issue," he wrote, "would then become the substance of the differences between the Republican approach and the Democratic alternative."
There is no question whatever that the administration views this Democratic plan as totally unacceptable. "A political gimmick," a senior Treasury Department official told us. "They're outbidding the president but with a Catch-22." Reagan would have to abandon the supply-side theory on which his bill is based if Congress imposed any trigger device at all -- with the possible exception of a trigger Reagan himself could pull without the advice or the consent of Congress.
Thus, the Democratic plan is designed not as the opening wedge of any compromise with the administration but to attract a few conservative Democrats -- and conceivably a handful of liberal Republicans from the Northeast -- in the key floor vote substituting Reagan's bill for Rostenkowski's.
Republicans who might be won over are those who took heavy heat on the budget fight in districts with large numbers of lower-middle-income voters clearly favored by Rostenkowski's income tax cuts. Conservative Democrats who are worried about deficits in the last year of the Reagan plan despite deep cuts in the budget, including Jenkins himself, would feel safer with the out-year Jenkins trigger.
Moreover, Rostenkowski's generous treatment of business and corporate tax cuts and investment incentives has real appeal for the business community, particularly small, capital-intensive enterprises favored in his bill. A hedge against the possiblity of a large deficit during the last year of Reagan's tax cut -- if supplyside incentives fail to build economic growth and tax revenues -- could prove attractive to the business community.
But the politics of adding one or two years of individual tax cuts to Rostenkowski's bill is simple -- and simplistic: deprive the president of the persuasive argument that he is guaranteeing three years of deep, continuous individual tax breaks two years for the Democrats. That third-year reduction amounts to $40 billion.
When the president makes that case over national television shortly before the House test, voters hungry for tax relief will get the message.