President Reagan has rejected proposals of his economic advisers for selective tax increases to reduce the burgeoning federal budget deficit, White House officials said today.
"The president absolutely believes that tax increases would inhibit economic recovery rather than stimulate it," a senior administration official said.
He said that Reagan showed an uncharacteristic display of anger Wednesday over published reports that Treasury Secretary Donald T. Regan favored tax increases and related articles that predicted that the size of the fiscal 1983 federal deficit will exceed earlier forecasts and reach at least $180 billion.
"Where is this talk coming from?" an official quoted the president as saying to senior advisers here. "They'd better realize that I am not retreating in any way from my opposition to new taxes."
Reagan was not critical of his treasury secretary, who is considered one of his favorites in the Cabinet.
Instead, the president blamed unidentified staff officials at Treasury and the Office of Management and Budget. He said he was suspicious that some of them were being unduly pessimistic about the economy in an effort to make a case for a tax increase.
Reagan reportedly expressed similar sentiments in a budget review meeting attended by OMB Director David A. Stockman and other high-ranking economic officials shortly before he left for a week's vacation in California. An aide said that Reagan pounded the table at this meeting in emphasizing his opposition to new taxes.
While White House spokesman Larry Speakes has said he would bet that the president ultimately would oppose tax increases, administration officials have been slow to publicize Reagan's displeasure with the tax increase talk coming from prominent administration officials.
That's because there are those on the White House staff who believe that the president ultimately may have to modify his position, as he did earlier this year.
After vetoing recommendations of his staff for new excise taxes last January, Reagan gradually became convinced that some selective increases were needed to close loopholes created by the 1981 tax-cut bill. Last August Reagan supported a bipartisan $99 billion tax bill that passed the Congress over bitter opposition by conservative House Republicans.
Reagan has assured these generally loyal House Republicans that he does not intend to lead them down the path of tax increases again.
One White House official observed that the president had not "even begun to engage in the process" that would lead him to favor a tax increase.
This official, however, like many others in the administration, acknowledged that the president ultimately would have to face some hard decisions in deciding among his three key priorities of continued tax reduction, increased defense spending and reduction of the ballooning federal deficit through further spending cuts.
"What we have to face is the reality that there is no constituency for cutting federal spending," the official said.
But he said that, among the various unsatisfactory choices that the administration may have to make, living with a large deficit is preferable to the president compared with the alternatives of slashing defense spending or increasing taxes.
Some of the changes favored by Treasury Secretary Regan--most notably the removal of the tax deduction for interest payments on second homes--would adversely affect the wealthy businessmen and investors who have benefited most from the Reagan-sponsored tax programs.
These are the people who were most in evidence tonight at a gala New Year's Eve party at the 220-acre estate of Walter and Lenore Annenberg, where the Reagans have been guests this week.
In addition to a long list of business and socialite friends of the president and Nancy Reagan, the party was attended by Secretary of State George P. Shultz, Attorney General William French Smith, national security affairs adviser William P. Clark and their wives.
Shultz conferred with Reagan for an hour this afternoon after arriving here from his home in Palo Alto. Officials said the discussion covered a wide range of topics, including the Middle East, Soviet feelers for a summit meeting and the MX missile.
Significantly, there was no discussion today of the proposed tax increases, which officials said have not even been sent to the White House.
"Maybe the people at Treasury and OMB have figured out the way the president feels about tax increases," one official said.
And whether or not they have figured it out, he added, Reagan's position opposing such increases remained unchanged.