Treasury Secretary Donald T. Regan hinted strongly to a business group yesterday that, as part of a simplification plan he will send President Reagan next week, he will recommend that the government start taxing several fringe benefits not now counted as income.
Sources at the 45-minute discussion of the proposal said Regan did not specify which benefits might be involved.
But the tax-exempt status of such benefits, the most important of which are contributions by employers to retirement and health-insurance funds, costs the Treasury an estimated $70 billion a year.
The tax-simplification plan under study is a trade-off in which rates would come down but many deductions, exemptions and other tax preferences would be abolished. The president has asked that it be revenue-neutral, so that the government's total tax take remains unchanged.
There have been reports that the top tax rate for individuals might be brought down from 50 percent to about 35 percent under the plan, but that will depend on how many preferences are folded back into the income base.
Regan also assured the business people yesterday that his proposal will have liberal transition rules, meaning the new provisions would be phased in. This is done with most major tax changes to give people time to rearrange their financial affairs.
Regan told the business group that the current tax code is not just a revenue-raising instrument but an industrial policy, helping some businesses and hurting others, sources said.
He said that in some cases this industrial policy may be unwise, helping industries that produce the fewest jobs.
Regan said he will seek to keep the new plan from hurting capital formation. But he warned that there would have to be some give and take among taxpayers, meaning that some companies would be hurt by tax changes and others would be helped, sources said.
In his State of the Union address last January, Reagan ordered the Treasury Department to study simplification, saying he wants a system that is simpler and fairer than the current one.
According to the sources, Regan told the business people that two individuals with the same income should pay about the same tax and now often do not.
He noted that a person who is compensated in large part in fringe benefits may pay far less tax than one who has the same compensation all in wages.
Fringe benefits have tempted the tax collectors at Treasury, but such benefits have powerful constituencies and are hard to dislodge.
Tax-free benefits such as employer-paid health and dental insurance, child-care and pension benefits cost the Treasury about $70 billion in lost revenue in 1983.
That amounted to almost one-fourth of the total reduction in potential tax revenues last year brought about by various tax credits and deductions.
The money spent on tax-free fringe benefits for employes reduces a company's corporate taxable income. These contributions aren't counted as income for employes, so there is no increase in revenue from individuals if fringe benefits are not taxed.
Regan did not mention specific fringe benefits that the administration may attack.
Among some of the largest tax-free fringe benefits and their costs to the Treasury are:
* Employer-paid child care, which is estimated to grow from $10 million in 1983 to $155 million in 1988.
* Employer contributions for health-insurance premiums and health care, estimated to grow from $19 billion in 1983 to $36 billion in 1988.
* Net exclusion of pension contributions and earnings, which cost $50 billion in 1983 and would grow to $109 billion in 1988.
* Life-insurance premiums, estimated to grow from $2 billion in 1983 to $3 billion in 1988.
* Disability premiums, $115 million in 1983, estimated to grow to $140 million in 1988.
The meeting yesterday morning was attended by people from both large and small businesses.