Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, said yesterday that he will oppose any tax bill that does not also raise revenue to reduce the federal budget deficit.
Rostenkowski said that reducing the deficit, estimated at $200 billion per year for several years, is the first priority of Congress and that revenue-neutral tax plans such as the one advanced last week by the Treasury Department would not be acceptable.
Incoming Senate Finance Committee Chairman Bob Packwood (R-Ore.), appearing with Rostenkowski on ABC's "This Week with David Brinkley," said he would oppose action on any tax bill until after Congress deals with spending cuts, although committee hearings could proceed. Packwood repeated his opposition to a basic element of the Treasury plan -- taxing employer-paid benefits such as health insurance.
The opposition of the two leaders of Congress' tax-writing committees further dims the already bleak prospects for the Treasury plan, which would cut tax rates for individuals and businesses but remove many current deductions and preferences.
Incoming Senate Majority Leader Robert J. Dole (R-Kan.) also said emphasis should be put on spending cuts and cautioned against quick action on a tax plan.
"I wouldn't consign it to the ash heap yet," Dole said of the administration's tax plan. "I suggested we ought to either have a two-track system or keep that in abeyance until we are firmly on the way to deficit reduction."
Dole, appearing on NBC's "Meet the Press," said that for a $200 billion reduction package over three years the Defense Department budget would have to be cut by $30 billion to $50 billion.
Dole reflected pressure growing on Capitol Hill, especially among some leading Republicans, to include the defense budget in any deficit reduction plan.
The defense reductions should start small and grow larger at the end of the three-year period, Dole said.
"What we really need to discuss is a freeze-plus," he said, freezing funding of some programs, reducing growth in the defense budget and eliminating some other budget items.
Rostenkowski and Packwood also joined the chorus of legislators calling for reductions in the proposed defense budget. Packwood said that between $8 billion and $15 billion would have to be taken out of the $310 billion proposed for the fiscal 1986 defense budget before Congress would attempt to cut any other programs. Rostenkowski said the tax plan unveiled last week by Treasury Secretary Donald T. Regan is "very forward-looking."
But he said that tax legislation "on a revenue-neutral basis doesn't do what I think the country is crying out that has to be done, and that's reduce the deficit."
"What the Treasury has done is a giant step in the right direction, but we're not going to be able to be satisfied with revenue-neutral proposals if we're going to do something about the deficit," Rostenkowski said.
President Reagan so far has not embraced the Treasury secretary's plan, but he has publicly rejected a tax increase in anything he would propose.
Some administration critics have suggested that the administration would propose a revenue-neutral plan and then wait for Congress to transform the proposal into a tax increase to reduce the budget deficit.
Rostenkowski suggested that tax legislation and deficit reduction could be considered simultaneously. He said he would be willing to look at any spending reduction proposals "as long as we can parallel them to what we're going to do with respect to raising revenues."
Rostenkowski said, however, that there is no chance the House will lump all spending cuts into one up-or-down vote, as some in the White House have suggested.
Regan, also appearing on the Brinkley show, said it is possible to have revenue-neutral tax reform and action on the deficit next year.
He said he believes that the administration can "maintain a two-track system" and take action in both areas.
Regan also denied reports that the administration plans to eliminate some federal programs as a deficit-reduction measure. He said funding for some programs would be frozen at fiscal 1985 levels and said the administration does not plan to raise taxes.
Although the Treasury Department rejected a national sales tax to raise revenues as part of the tax simplification plan, Regan said that such a tax "might be needed some year, some time in the distant future if we ever needed to raise taxes, but we don't need to raise taxes now."
Regan also said he would be staying in his present post during the new administration, at the request of the president.