House Democratic leaders yesterday indicated that tax increases are likely next year and agreed to push in the lame-duck session next month for jobs and housing legislation that would be financed by curtailing the administration's proposed defense buildup.
As the White House was reaffirming its opposition to defense cuts and what it called "make-work, dead-end" jobs programs, the Democratic leadership in the House tentatively endorsed the general outlines of a plan for more public works jobs and new housing subsidies similar to those vetoed earlier this year by President Reagan.
Unspecified defense spending cuts would cover at least part of the cost of the new domestic programs.
House leaders were also considering proposing in the lame-duck session a 5-cent-a-gallon gasoline tax increase to finance road and bridge projects, which they said might have bipartisan support. Another strong possibility, they said, is legislation for next year to limit the 1983 individual tax cut to households below certain income levels, which they indicated would probably not have Republican support.
Although House Democrats will pick up 26 votes from last week's elections by waiting until the 98th Congress takes office in January, Joint Economic Committee Chairman Henry S. Reuss (D-Wis.) said the Democrats intend to push for immediate action "because we need to get people working now."
The indications that major tax increases may come next year came separately, in speeches and interviews, from Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) and Budget Committee Chairman James R. Jones (D-Okla.).
"The real choice facing the Reagan White House is between big defense cuts and big tax increases," Rostenkowski told the American Petroleum Institute in Houston.
"If he Reagan refuses to slow military budgeting, then he's got to find a way to pay for it," Rostenkowski continued. "Congress will never allow him to pay for defense out of Social Security savings. That kind of revenue can only come from big tax increases -- tax increases that will largely fall on business."
If taxes have to be raised, Rostenkowski told the petroleum industry leaders, "the oil industry will be in the line of fire."
Jones said in an interview here that he would support deferral of the 10 percent across-the-board income tax cut scheduled for next year -- the third installment of the three-year tax cut Reagan won in his first year in office -- along with subsequent indexing of tax rates to offset inflation, until the federal deficit is brought down to $100 billion or some other designated level.
Current deficit projections for fiscal 1984, for which the administration is now drafting a budget, range as high as $200 billion.
Coupled with up to $30 billion in new spending cuts, including limiting defense increases to 5 percent a year and modifying cost-of-living increases in domestic benefit programs, such deferral of future tax cuts could slice projected deficits roughly in half, Jones contended.
Both Rostenkowski and Jones also indicated at least qualified support for a 5-cent-a-gallon increase in the gasoline tax, which Transportation Secretary Drew Lewis is pushing within the administration.
"I think next year we'll be forced to add another nickel of tax to the Highway Trust Fund, but only to the Highway Trust Fund, to begin the massive reparation of the nation's bridges and roads," said Rostenkowski. A gasoline tax increase "has to be considered seriously," along with other excise taxes and import fees, said Jones. Reagan has said he opposes a tax increase next year.
At the White House, deputy presidential press secretary Larry Speakes said Reagan also remains philosophically opposed to what he called "make-work, dead-end jobs proposals that haven't worked" but stopped short of including the Lewis proposal in that category.
Nor did Speakes rule out some form of jobs initiative, such as one that might be offered next year by Republicans in Congress. Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) and Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) have urged a public works jobs program and committee aides are exploring options, although no legislation has yet been drafted.
Although the White House is known to be locked in a major dispute over defense spending levels, Speakes also reaffirmed Reagan's opposition to any cutback in his military expansion program and endorsed a comment from Defense Secretary Caspar W. Weinberger to the effect that defense spending creates jobs. "No, there's no consideration of cutting defense spending," said Speakes.