Less than one month before President Reagan is to make public his revised tax-simplification plan, Treasury Secretary James A. Baker III has yet to decide what he will recommend to the president on most of the proposal's important provisions.
Sources said such crucial issues as whether to tax employe fringe benefits, the deductibility of charitable contributions, the levels of personal and corporate tax rates and the size of the personal exemption remain unresolved. Although officials said the principal options are being drafted, the number of decisions still to be made raises questions about whether the administration can meet its goal of announcing the plan just after the president returns from his European trip May 11.
Treasury officials said they are confident the deadline can be met. They also said they are fairly firm in their intention to terminate the deduction for state and local taxes and wipe out the investment tax credit. But the department is considering easing the pain of eliminating the credit, which can be up to 10 percent of the cost of the investment, by phasing it out gradually.
One important undecided issue involves how to let companies write off their investments. One option is to stretch the period during which investments can be written off, while still lumping tax benefits in the early years. Whatever Baker proposes, it is expected to be considerably more generous than the system laid out in the original version of the Treasury plan.
Pressure to retain business tax benefits increased yesterday as 58 executives of blue-chip companies and associations wrote Baker, asking him to retain "essential capital formation provisions of present law" while reducing corporate rates.
In a meeting Tuesday with Republican members of the Senate Finance Committee, Baker expressed sympathy with senators who made the same point.
"My impression is it is going to be a substantial improvement over the first Treasury proposal," said Sen. John Heinz (R-Pa.).
Baker told the senators that Reagan is serious about his pledge to try to reduce the top individual rate even below the 35 percent proposed in the first plan, and he again said that rates can be reduced only if deductions and credits are cut back to expand the tax base, according to sources at the meeting.
Baker emphasized that Reagan will make the final decisions on the reshaped plan.
Responding to an objection about ending the deduction for state and local taxes, Baker said it benefits only the 34 percent of taxpayers who itemize deductions.
He also appeared sympathetic to senators who said they did not like shaving the deduction for charitable contributions and ending lower tax rates for small businesses. The Daily Tax Report, a Bureau of National Affairs trade publication, reported that Treasury also has decided to retain the mortgage interest deductions for second homes as well as primary residences.
The letter to Baker was generated in response to a similar one sent a few weeks ago by 10 other corporate executives who endorsed the idea of tax revision, especially a reduction in the corporate tax rate.
The executives who signed yesterday's letter were from such companies as Chrysler Corp., Mobil Corp., Exxon Corp., United Technologies Corp., United Airlines, U.S. Steel Corp., Ford Motor Co., AT&T Co. and GTE Corp. Associations included the Chamber of Commerce and the National Association of Manufacturers.