Senior Reagan administration officials, increasingly worried by the budget impasse with Congress, favor a compromise that would include a tax increase of about $45 billion on Jan. 1, 1985, administration sources said yesterday.
The new plan, which has yet to be presented to the president, would advance the effective date of the administration's proposed $5-a-barrel excise tax on oil and a 5 percent surcharge on individual and corporate income tax rates from October 1985 to January of that year, adding about $35 billion to fiscal 1985 revenues.
The tax increases would take effect in 1985 regardless of the size of the federal budget deficit and would be "triggered off" in some later year only if the deficit fell below some set level, perhaps 1 percent or 1 1/2 percent of the gross national product. The president's present proposal makes the tax increase even in the beginning contingent on deficits being higher than 2 1/2 percent of GNP.
In addition, some of the other contingencies tied to the current proposal would be dropped, including the requirement that all of the administration's recommended domestic spending reductions be enacted first. Both Republicans and Democrats in Congress agree that many of the spending cuts stand no chance of passage. A promise of some cuts, though not legally tied to the tax increases, likely would still have to be part of an overall compromise.
The plan would increase federal revenues by about $80 billion over the next three years, slightly more than is called for by the Senate's version of the 1984 budget resolution passed Thursday and opposed by the president.
The compromise, which has been under discussion for about six weeks, is opposed by other Reagan aides on the grounds that Congress would not make desired cuts in domestic spending or might even increase it.
One backer of the new plan declared, "I'm distressed at the narrow focus of the debate over taxes. Everyone is focusing on 1984 when the real issue is the out-years."
Added another Reagan adviser, "We're trying to think of how things can be changed slightly without wrecking the whole program or what we stand for and at the same time bring us a credible budget."
The new scheme has been discussed privately with some members of Congress, officials said, but there has been no indication whether it could get enough support to gain approval.
The officials involved, like many private financial analysts and economists, are worried that interest rates will soar as the recovery proceeds and rising business and household borrowing begins to collide with the Treasury's need to finance annual deficits of $200 billion or more. That is the same worry expressed by Sen. Lawton Chiles (D-Fla.), a prime backer of the effort to get taxes increased immediately.
President Reagan, at his press conference Tuesday, gave no indication of a willingness to compromise on taxes. "I will not support a budget resolution that raises taxes while we're coming out of a recession," he declared. "I will veto any tax bill that would do this."
But one adviser said Reagan was prepared at the press conference to reiterate his support for his present stand-by tax proposal if asked about it. Agreeing that Reagan had hardly extended an olive branch on the issue, another senior official said, "You haven't heard him answer a compromise put in front of him.
"All right, if we have some spending cuts and we can get this type of tax increase, what would happen?" he continued. "The president obviously can't commit in advance, but if something is laid on his desk he'd have to look it over very carefully."
Concluded the official, "I do not think that we can continually offer to the money markets $200 billion deficits or thereabouts and expect that they will infer anything except inflation and higher rates of interest." Without action on taxes, that could become a "self-fulfilling prophesy."
The senior officials agreed fully with the president's asserting that "while we're coming out of a recession" is not the time to raise taxes. However, if Congress insisted on making some small tax increases during fiscal 1984, that would not necessarily damage the recovery, the officials said.
But the officials ruled out any possibility of repeal or capping of the 10 percent cut in individual income taxes to be reflected in withholding on July 1, or repeal of indexing that tax for changes in inflation which is to be effective in 1985.
One official suggested that a $2 excise tax on domestic and imported oil would raise $10 billion and that making it effective, say, Jan. 1, 1984, might win the president's approval.