President Reagan, who earlier had vowed to veto legislation repealing withholding of taxes on dividend and interest income, yesterday took a softer position on a Senate proposal to postpone and probably kill the withholding provision altogether.
"The president has not endorsed or embraced or said he would veto any compromise," Larry Speakes, deputy White House press secretary, said. Appearing to be preparing the way for White House acquiescence, Speakes said the Senate proposal is "postponement, not repeal."
Although the proposal worked out by Sens. Robert W. Kasten Jr. (R-Wis.) and Robert J. Dole (R-Kan.), chairman of the Senate Finance Committee, appeared to have strong support, it was held up yesterday by Democrats, some of whom want to force a vote on complete repeal of the withholding provision.
But Senate Minority Leader Robert C. Byrd (D-W.Va.), a supporter of repeal, said the Dole-Kasten agreement is "tantamount to repeal. We're getting what we wanted."
Meanwhile, strong opposition to the legislation was voiced in a closed caucus of Democratic members of the House Ways and Means Committee. Participants reported strong sentiment to force a straight up-or-down vote on repeal without qualifications and accompanied by tax increases on the banking industry to help make up for the $13.4 billion over six years that withholding would yield.
The Dole-Kasten deal would put off withholding from this July 1 until July, 1987. It could then be imposed only if Congress found that fewer than 95 percent of taxpayers were reporting income from these sources and it then voted in favor of withholding. The Dole-Kasten proposal would create new $1,000 penalties for failure to report interest and dividend income, and would also require banks to withhold 20 percent of such income from persons found to have violated the law.