In explaining the other day why he had approved what amounts to a radical reform of the whole tax system, Treasury Secretary Donald Regan said that the more he studied the present law, the more he realized that halfway measures wouldn't do.
"I decided we had to go for the whole enchilada," Regan told me.
Tax reform, Regan has said repeatedly in the past few days, "is an idea whose time has come." And if anyone ever doubted that the madcap, jungle-like structure favors some persons and some corporations over others, the proof can be heard in the anguished cries of opposition to the Treasury's reform proposals.
But the initial euphoria generated among tax reform backers by the Treasury tax simplification plan, which would cancel out some of the most egregious tax shelters, and at the same time lower top marginal rates, seems to be fading.
Regan himself agrees that "reducing the deficit is the No. 1 priority. Tax simplification would take a back seat to that. I think they (Congress) should hit the budget deficit -- the first thing that they do -- and then get on with tax simplification."
This is a conclusion that is echoed by the new team of Republican "big hitters" on Capitol Hill, including Sens. Bob Dole, the new majority leader, and Budget Committee Chairman Pete Domenici. The new Senate Finance Committee Chairman, Robert Packwood of Oregon, is not a tax reform enthusiast, but wants to get on with deficit reduction by sizable spending reductions -- including cuts in the defense budget.
Meanwhile, President Reagan's corps of political advisers, after successfully conducting a charade all through the election campaign that denied the existence of a serious deficit problem, is also focusing on ways of stemming the flow of red ink, rather than pushing tax reform.
Domenici tipped us all off to the real sense of White House priorities. On a recent Cable News Network appearance, Domenici said that, at a strategy session with congressional leaders, when "we turned to tax reform . . . that didn't take too long. That was more or less a bird's eye view. And then we went right to the budget reduction package."
The present White House goal, as has been reported, is a reduction of about $100 billion in the deficit in no more than three fiscal years, or a reduction from 4 percent to 2 percent of the gross national product by a "selective freeze" process that allows growth in service on the debt, Social Security and defense. But the figures presented by OMB director David Stockman to the Republican leaders also showed that such a freeze would save less than $20 billion of the required $100 billion deficit- reduction target.
Where can the balane come from? Almost no one in the administration any longer clings to the phony campaign theory or slogan that we can "grow our way out of the deficit." Logic, therefore, compels attention to the need for reductions in spending programs -- including the Pentagon demands issued by Defense Secretary Caspar Weinberger. So far, the combination of a freeze and domestic spending cuts identified by Stockman fall short of the $100 billion goal by about $35 billion. All of that, says a group of Reagan Cabinet officers privately, must come out of defense outlays.
And logic, of course, brings us back to the tax equation: There isn't going to be any way of dealing with the deficit problem without a net tax increase -- with or without reform -- short of wholesale abandonment of government programs, a step that no congressman, Republican or Democrat, favors.
The Republican leadership in the Senate obviously doesn't want to cross swords with President Reagan on the tax increase issue. Reagan has made it such an article of his personal faith that it is difficult for Dole as the majority leader to stake out a different position.
But Dole and other important members of the Republican establishment on the Hill are obviously thinking in tax-increase terms. On "Meet the Press" last Sunday, Dole said that if the spending reductions carved out eventually by the White House and Congress don't cut the deficit enough, Congress could pick up some money by closing some of the same tax loopholes pinpointed in the Treasury tax-reform plan.
"I know that might frighten some people, but there are loopholes that can be closed," Dole said. Of course there are: What Congress must eventually agree upon is a tax reform or simplification plan that is not "revenue neutral." Tax reform can become the vehicle not only for eliminating the terrible unfairness of the existing system. It would take the shape of "simplifying taxes upwards" -- that is, combining reform with more revenue.
In the real world of practical politics, can this happen? It's a long shot that can pay off only, as House Ways and Means Committee Chairman Dan Rostenkowski say, if President Reagan takes the lead.