President Reagan was reported yesterday to be preparing a major State of the Union package of fiscal aid and program transfers for the states and cities that would begin to put flesh on the bones of his promise to shift revenues and responsibilities from Washington.
Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) said the program would be a "humdinger" after he and House Minority Leader Robert H. Michel (R-Ill.) were briefed by the president and other administration officials.
Neither Baker nor Michel would elaborate on the contents, preserving the secrecy the White House hopes to maintain until Reagan gives his address to Congress and the nation next Tuesday.
But sources on Capitol Hill said it would probably include some or all of these items:
* A sizable boost in federal excise and luxury taxes, with some of the proceeds going to the states and the rest being used, for the next few years, to reduce federal deficits. In return, states would take over some federal education programs.
* An increase in federal gasoline taxes, perhaps from 4 to 8 cents a gallon, with most of the proceeds earmarked for the interstate highway system but some ticketed to help mass transit systems.
* A tradeoff of multibillion-dollar welfare programs, with the federal government taking over the state share of Medicaid payments for the elderly and state portions of Supplemental Security Income (SSI) payments for the elderly and disabled, in return for a state assumption of the federal share of aid to families with dependent children (AFDC).
* An increase in federal revenue-sharing funds for the cities, in return for cancellation of some federal urban aid programs, but not the popular community development block grants or urban development action grants.
Sources on Capitol Hill, who said the package was meant to be big enough to "dominate the 1982 election debate," also cautioned that none of these elements was firmly assured and said it was likely that other, surprise elements would be added.
No one could estimate with accuracy what the net effect of the package under discussion would be on state and local budgets. But officials said that the president had been influenced by a number of senators, including Paul Laxalt (R-Nev.), to take seriously complaints from governors and mayors that the first round of budget cuts had fallen disproportionately on their shoulders.
He was reported to be pressing aides to find ways in which the federal government could demonstrate its serious intent to shift revenue sources and programs to state and local governments. But some congressional analysts said they thought the tradeoffs might do more to close the federal budget deficit than ease the fiscal pressure on states and cities.
Meanwhile, Office of Management and Budget Director David A. Stockman found himself embroiled in separate controversies with two members of the House Republican leadership and the Democratic chairman of the House Budget Committee.
In an unusually blunt "Dear Dave" letter, Trent Lott of Mississippi, the House Republican whip, and Jack Kemp of New York, the chairman of the House Republican conference, accused Stockman of pushing excise tax increases that "go after the little guy," while condoning up to $30 billion a year of what they called "corporate welfare."
Saying they were "deeply disturbed by the lack of political and economic common sense" in the campaign by Stockman and other presidential aides to persuade Reagan to raise taxes, the two House Republicans said the drive was an insult to "the intelligence of the American people."
"Why must OMB economists always 'go after the little guy' to the detriment of the national economy and the Republican Party?" they asked. "OMB seems to be saying that the economic problem today is that working men and women have too much money to spend, and that the only solution is to raise taxes on the average citizen's consumption of beer, gasoline and other personal items."
If further budget cuts are needed, they said, they should not come from the welfare programs but from oil companies and other corporations' subsidies. They challenged Stockman to make public "a confidential OMB list of corporate welfare, approaching perhaps $30 billion a year in direct spending, excluding tax expenditures and user fees."
OMB spokesman Edwin L. Dale Jr. said there was no "quantified" list of "corporate welfare" programs but that Stockman had sent Kemp a letter listing "every conceivable program helpful to business . . . along with some of the direct subsidies."
House Budget Committee Chairman James R. Jones (D-Okla.) told reporters that Stockman had broken off communication with him since last autumn, and asserted that the isolation reduces the chances of bipartisan cooperation on the "politically difficult" decisions Jones says will be necessary to avoid budget deficits of more than $100 billion in each of the next three years.
Jones said he had not heard from Stockman since the Atlantic Monthly interview with him appeared last fall and he predicted that Stockman's statements in that article will guarantee him a "skeptical reception" when he comes before Congress to defend the new Reagan budget.
"If Stockman loses the internal fight on tax increases to the supply-side cultists," Jones said, "he will have a very tough time selling the program to Congress--especially after last year's credibility problems."
Dale said it was "not abnormal at all" for Stockman to have suspended discussions with the Democratic committee chairman during the time the president was making his budget decisions, adding, "He couldn't very well have much consultation until he knew what the president's main decisions were going to be."