President Reagan asserted yesterday that passage of a major tax simplification plan by Congress is "all but inevitable," and administration officials said he is ready to compromise on most aspects of his newly minted proposal in hopes of winning approval by October.
"Even those in this town who are still reluctant are being lifted up and carried forward by the momentum of public support for a fundamental change in our tax laws," Reagan told a group of ethnic and religious leaders at the White House.
The administration published details of the Reagan proposal showing that it would reduce individual tax payments by 5.2 percent by 1990 while raising corporate tax payments 22.5 percent by then. This shift in tax burdens would come at the same time as elimination or curtailment of many existing tax breaks in exchange for lower rates.
Reagan set the tone for what is expected to be a months-long lobbying effort yesterday by celebrating the tax cuts in his plan and denying the existence of tax increases. "Our proposal is not a tax increase and it will not increase the deficit," he said.
At the same time, a senior administration official said Reagan is open to compromise with Congress on almost all elements of his proposal -- including lower individual rates -- but not the elimination of the deduction for state and local income taxes.
That provision, opposed by officials in high-tax states, is expected to become a major battleground in the congressional debate. The senior official, who spoke on condition that he not be identified, said the new revenue involved was so large -- about $40 billion by 1990 -- as to make it impossible to compromise.
The official said Reagan would consider reducing the top individual rate in his plan, 35 percent, in response to congressional pressure for still lower rates. "We'd be happy to go down further, but people will see it is exceedingly hard to do that," the official said.
Reagan proposed consolidating the existing 14 tax brackets into three brackets -- 15 percent, 25 percent and 35 percent -- while eliminating many tax breaks for individuals and corporations.
Treasury Secretary James A. Baker III said yesterday that the administration "explored" the possibility of a lower top rate for individuals and "we explored it in quite some detail and quite some depth because we too would have preferred to see a lower top rate, but we think there are some problems with getting there."
Baker said one problem was that lower top rates "obviously benefits the highest bracket taxpayers the most" and this would "impede the chances of the proposal passing the Congress."
Administration officials fanned out to television interviews and news conferences yesterday to portray the Reagan proposal as benefiting the majority of American taxpayers. Baker said that "80 percent of all taxpayers are winners under this proposal." But the White House reported that 58.1 percent of families would get a tax decrease from Reagan's proposal, 21.2 percent no change, and 20.7 percent a tax increase.
The administration document released yesterday also showed that the shift in tax burdens from individuals to corporations is more pronounced than Reagan had suggested in his Tuesday night address to the nation. The president had said that individuals' tax payments would be reduced by 7 percent and corporate payments increased by 9 percent. That, however, would happen by the year 2025.
But officials acknowledged yesterday that, by 1990, the shift would be a reduction in individual payments of 5.2 percent and an increase in corporate payments of 22.5 percent.
The senior official predicted that tax overhaul would be endangered if not completed by October, and said the administration would make a concerted drive toward this deadline.
Baker said, "We have a fair shot at getting this through Congress this year . . . a fair shot at keeping it reasonably intact." He added, "Nobody ever said it's going to be easy."
Reagan yesterday noted that House Ways and Means Chairman Dan Rostenkowski (D-Ill.) and Senate Finance Committee chairman Bob Packwood (R-Ore.) "have committed themselves to move ahead on tax simplification."
The president's proposal continued to receive qualified support from Democrats as well as Republicans on Capitol Hill. Congress officially begins consideration of the plan today with testimony by Baker before the House Ways and Means Committee, while Reagan is to deliver speeches in Williamsburg, Va., and Oshkosh, Wis.
Among Democrats who gave the plan their qualified endorsement was Sen. Russell B. Long (D-La.), ranking Democrat on the Senate Finance Committee. Long called Reagan's proposal a "great improvement" over the original Treasury Department plan put forth last fall, but said there is "still room for improvement" and indicated that he would push for unspecified changes.
Long's comments on Reagan's proposal illustrated conflicting pressures that will face the legislation. As the representative of an oil-producing state, Long praised the president's decision to keep tax advantages for the oil and gas industry, while other Democrats from nonproducing states have been critical of the decision.
The lobbying group Common Cause said it "welcomes and applauds President Reagan's leadership" on the issue but criticized specific features, including continued tax breaks for the oil and gas industry and retention of other tax loopholes that would have been closed by the earlier Treasury plan.
"The president talked . . . about closing loopholes that benefit a wealthy few," said Common Cause President Fred Wertheimer. "Yet the new plan substantially backs away from provisions in the orginal plan to close tax shelters, and it provides a capital gains tax break for Wall Street and stock investors that is even greater than under the present law."
Baker responded to this criticsm yesterday by urging reporters to ignore the first Treasury proposal, and compare Reagan's plan instead with current law.