Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) is exploring the idea of a huge, special national sales tax over the next few years to finance stepped-up defense spending and help reduce federal deficits, sources said yesterday.
There is no federal sales tax now, and the idea of exploring one is the latest indication of how far congressional leaders are reaching in an attempt to bring skyrocketing deficits under control while financing the big defense spending buildup that President Reagan wants.
As it was described yesterday, the tax could be large enough to finance the entire defense budget, which will exceed $180 billion this year, more than one-quarter of the entire federal budget.
It would be of limited duration, timed to coincide with Reagan's push for a military buildup.
The idea would be to sell it as a defense tax. "If defense is important, people might be willing to go along" with the tax, said one source.
Although the levy would be high, some necessary items of daily living, such as food, might be exempted.
Although it was known that Baker has brought up the tax idea with others, his office last night issued a statement saying that, while there have been some discussions of a "national defense fund," no methods of financing have been discussed. Baker's office also said the fund itself was still only in the talking stage.
Other sources said Baker had shared the idea with administration officials, including Treasury Secretary Donald T. Regan, as well as a few Senate colleagues.
Baker's explorations were described as preliminary and tentative, "purely in the talking stage at this point," as one source put it. Another said it is only one of about 20 tax ideas under consideration by congressional Republican leaders and indicated that the likelihood of its being formally proposed is slim.
There was no immediate indication of the administration's reaction to the idea. Nor, because of the limited circulation of the idea on Capitol Hill, was there any indication of whether it would get a favorable reaction in Congress.
Other ideas under active consideration by Senate Republican leaders include a variety of energy-based taxes, including a levy on the proceeds from decontrol of natural gas prices, and a general value-added tax, which is a kind of sales tax on the value that is added to an item during various stages of production.
Baker yesterday renewed his support for more speedy decontrol of natural gas prices and a tax on the proceeds, an idea broached Sunday by Senate Finance Committee Chairman Robert J. Dole (R-Kan.) during a televised interview.
Baker said a "windfall-profits-type of tax" is essential to win congressional approval for speeded-up decontrol.
Although he opposes such a tax, Sen. J. Bennett Johnston (D-La.), a leading oil- and gas-state legislator, essentially agreed with Baker's assertion. Johnston said such a levy would be "inevitable" for any type of gas for which prices are decontrolled.
Several Senate Republican leaders, including Baker, are scheduled to meet today on the natural-gas deregulation issue with Reagan, who favors decontrol but has rejected the idea of a tax on the proceeds. Aides to the Senate leaders said they are also expected to discuss Reagan's latest budget-cut proposals, which have bogged down in Congress, although the Republican leadership of both houses has agreed to try to achieve Reagan's overall three-year goal of $115 billion in new savings.
House and Senate GOP leaders are promising to deliver no more than half of Reagan's package of $16 billion in spending cuts and revenue measures for 1982, and many of them are insisting that major tax increases will be necessary in order to reach the three-year goal.
However, Dole and others have indicated they are reluctant to push for tax increases unless the administration is willing to endorse them--something it has not yet shown any enthusiasm for doing.
The Republican-controlled Senate once again demonstrated its skittishness on the subject of tax increases, especially when combined with the sensitive issue of Social Security, in unanimously endorsing a sense-of-the-Senate resolution opposing any move to tax Social Security benefits.
The resolution was proposed by Senate Minority Leader Robert C. Byrd (D-W.Va.), who said he feared Social Security benefits might be taxed as a means of raising revenue. But Dole said taxing Social Security was not under consideration. "We're just letting someone else who's running in '82 an apparent reference to Byrd force a vote not to tax Social Security," said Dole.