Senate Republican leaders told President Reagan yesterday that they favor tax increases next year and in 1984 to help narrow the federal budget deficit from an expected range of $95 billion to $110 billion in the current fiscal year to a hoped-for $40 billion to $45 billion by 1984.
However, the president has not decided whether to propose additional taxes, and will reserve a decision on this until just before his State of the Union message to Congress on Jan. 26, deputy press secretary Larry Speakes told reporters before the meeting.
Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) and Pete V. Domenici (R-N.M.) and Robert J. Dole (R-Kan.), chairmen of the Senate Budget and Finance committees, respectively, met with Reagan for an hour and 15 minutes yesterday. They said afterward that the president was seeking congressional "input" for the 1983 budget, which he is expected to send to Congress on Feb. 8, and had not told them what he intended to propose.
Dole suggested that there should be tax increases of $20 billion to $25 billion for 1983 and 1984 together, on top of $22 billon that Reagan said last September he would propose.
A total tax increase over two years of about $45 billion would not be a "very substantial amount," Dole said, particularly when compared with the $240 billion tax cut forthcoming in those two years as a result of last summer's tax bill.
However, Reagan has repeatedly opposed any tax increases, and apparently still is reluctant to propose them.
His economic advisers now favor raising excise taxes on tobacco, alcohol and gasoline, beginning in January, 1983, as well as closing some tax loopholes, in order to raise about $45 billion in 1983 and 1984 together, sources have said.
Yesterday, Associated Press quoted congressional sources as saying Reagan is expected to seek the higher excise taxes on alcohol, tobacco, gasoline and telephones. Reagan also is considering a proposal for a minimum income tax on individuals and corporations, AP reported.
If Reagan does not push for additional taxes, it would be difficult to win Senate approval of an increase, Dole said yesterday. "I wouldn't volunteer" to lead a move for tax increases, he told reporters.
The president has now decided on all the spending side of the 1983 budget, the senators said. Reagan has reportedly approved $31 billion in cuts for the fiscal year beginning in October. This would still leave a very large budget deficit for the year.
Domenici, who last fall argued for sizable additional taxes to narrow the deficit, yesterday stressed the importance of bringing down the 1984 budget gap, and showing the deficit shrinking to balance in the "outyears" of the budget.
He said he hoped the 1984 deficit would be cut to $40 billion to $45 billion. Some outside experts have predicted that the 1984 deficit could be as high as $200 billion with no further policy changes.
Domenici added that he was less concerned about 1983 and that he wanted to "put any tax changes as far away as possible from that recovery" in the economy which is expected to begin later this year.
Tax increases will have to be legislated this election year if they are to save money in fiscal 1983. There is general agreement that any additional taxes will not become effective until next January, which would mean that they would raise considerably less revenue for the remainder of fiscal 1983 than they would in a full year.
However, Domenici later stressed that he expected spending cuts and some tax increases in the upcoming budget to achieve "significant reductions" in the present projections of the 1983 deficit. Early administration forecasts put the 1983 budget gap at $150 billion, but this number has reportedly been revised downwards now.
Domenici said the 1983 deficit should be below the deficit in the current fiscal year, which he said was "evolving" and probably will be $95 billion to $110 billion. Administration economists have used defict targets of $95 billion for fiscal 1982, $75 billion for 1983 and $55 billion for 1984, as "guidance targets" for the budget preparation, sources said.
The Republican leadership also suggested scaling back the defense buildup Reagan plans. "It's virtually inconceivable that in a defense budget of $200 billion" you cannot find some cuts, Baker said yesterday.