Republicans and Democrats on the Senate Budget Committee hit a gridlock on taxes yesterday as a Democratic move to scuttle the remainder of President Reagan's tax-cut program, including the 10 percent income tax cut scheduled for July, failed on a tie vote.
In yet another indication of Reagan's budget troubles in Congress, the Democratic proposal got more votes than three other alternatives, including one offered by committee Chairman Pete V. Domenici (R-N.M.) that would have raised taxes in a substantial way only after fiscal 1985.
The deadlock on taxes shattered the bipartisan spirit that prevailed in the committee over the past week as it broke with Reagan over the spending side of the budget for the next fiscal year, fattening his domestic proposals by $11.3 billion while shaving $3.3 billion off his defense request.
But leaders of both parties renewed their vows of bipartisan cooperation and desire to produce a bipartisan budget as they returned from an afternoon of behind-the-scenes huddles to say they will resume deliberations on Tuesday.
"We should be able to come to a reasonable agreement on the revenue side of the budget ," said Sen. Lawton Chiles (Fla.), the committee's ranking Democrat and author of the Democratic proposal.
Senate Majority Leader Howard H. Baker Jr. (R-Tenn.), who conferred with committee Republicans on the impasse, indicated that they would not agree to a budget that jeopardized Reagan's tax-cut program, even if it involved only an income ceiling on the July tax cut, which Chiles had suggested as a possible compromise.
Domenici was less explicit, saying only that the July tax cut "in its entirety" is "one of the biggest stumbling blocks" to an agreement and that an eventual compromise is unlikely to "fit any mold." He noted that even Chiles' proposal did not entirely accommodate repeal of the July tax cut because it failed to account for revenue increases during the last three months of the current 1983 fiscal year which will end Sept. 30.
Domenici said the negotiations involved the possibility of some changes in domestic spending already tentatively approved by the committee but described them as relatively minor. Defense spending is not involved in the talks, he said.
The Democratic-controlled House has passed a fiscal 1984 budget resolution that calls for $30 billion in tax increases, almost exactly what the July tax cut will cost the Treasury.
Like Chiles' proposal, it also anticipates repeal of a law passed two years ago that would require automatic tax adjustments to account for inflation after 1985.
The 11-to-11 tie on the Senate Budget Committee, which has 12 Republican and 10 Democratic members, came when Sen. Mark Andrews (R-N.D.) joined a solid Democratic minority in voting for a $30 billion tax increase next year, which Democrats had said anticipated repeal of the July tax cut.
"We have to increase taxes if we're going to be honest with ourselves," Andrews said in insisting that tax increases were essential to reducing the federal deficit, which is expected to top $190 billion next year after hitting a record of more than $200 billion this year.
As Domenici faced a committee split between conservative Republicans who want no tax increases through 1988 and Democrats who want big tax increases starting next year, he argued in vain for a middle-ground position, close to Reagan's, that would have basically held the line on taxes until 1985.
While proposing only minimal tax increases for fiscal 1984 and 1985, Reagan had called for a total of $150 billion in "standby" taxes for the three following years, which would take effect only if the economy had recovered and deficits were still high. Another condition was congressional approval of his spending cuts, many of which the committee has joined the House in rejecting.
Domenici would have added $50 billion to Reagan's three-year standby tax package, raising $200 billion over five years, or a large portion of the $267 billion that the Democratic proposal would have raised over the same period. He also would have embraced Reagan's proposals for tax increases estimated by congressional budget officials at $2.7 billion for next fiscal year and $5.4 billion for 1985.
But most Democrats contended that bigger tax increases are needed now to encourage economic recovery by scaling back federal deficits, which they described as a major contributor to stubbornly high interest rates. Republicans, in turn, accused the Democrats of wanting higher taxes so they could spend more domestically.
Domenici sternly lectured both sides, warning Democrats that tax increases would jeopardize the economic recovery that is just getting under way and telling conservative Republicans that the deficit reductions they want will eventually require tax increases.
To those who argued for deeper spending cuts, he said it was "pure lunacy" to suggest that the committee hadn't made some fairly deep cuts in the rate of the growth in spending in tentatively adopting spending totals that fall short of the anticipated inflation rate for next year, even though they don't meet Reagan's demands.
Even if the committee reconsidered its spending proposals, as he himself suggested repeatedly over the past week, Domenici said it could save no more than a few billion dollars.
Moreover, he said, "You can't get 12 people a committee majority to agree on where we would cut."
In addition to rejecting Domenici's plan by 14 to 8, the committee also voted 15 to 7 to turn down a tax freeze proposed by conservative Republicans and 14 to 8 against a plan offered by Sen. Howard M. Metzenbaum (D-Ohio) to raise taxes by $36.3 billion next year and $377 billion over five years, even more than Chiles had proposed. 130:Picture, At work, Chiles Domenici, William Armstrong (R-Colo.) and Orrin Hatch (R-Utah). By James K.W. Atherton -- The Washington Post