President Reagan, preoccupied with the hostage crisis for the last three weeks, has decided to postpone until September his campaign to overhaul the tax code, and may turn his attention next to the budget, White House officials said.
The hostage drama totally overshadowed at least two weeks of Reagan's speeches on taxes. Now, officials said, they intend to use a summer break in the president's selling effort to modify the plan and prepare new defenses for it.
"All the special interests are taking shots at it," said a White House official who asked not to be identified. "I'm surprised it's in as good shape as it is." He added, "Reagan will pour on the heat in the fall."
Initial support for Reagan's proposal is giving way to uncertainty about its merits, according to a nationwide Washington Post-ABC News public opinion poll. Only 12 percent of those polled said they expected their taxes to be reduced by Reagan's plan, while three times as many said they expected their taxes to go up.
At the same time, House Ways and Means tax-writers are dissatisfied with Reagan's plan, but are stymied in their search for an alternative. Details on Page A6.
Reagan's tax proposal could be threatened if House-Senate negotiations on a budget resolution collapse, White House officials said.
This is because the president intends to push hard for the tax plan after Labor Day, but would be forced to battle Congress on spending bills at the same time if there is no budget resolution by then.
The White House is "desperately trying to keep them the budget and the tax plan on two separate tracks," so the tax overhaul legislation does not become a vehicle for a tax increase, one official said.
Meanwhile, officials said they were concerned about criticism of Reagan's plan. The "most serious complaint," one official said, is that it would hurt two-earner, middle-class families in some states.
"We got zonked" on that issue, and the plan could be modified by restoring the deduction that alleviates the "marriage penalty," the official said.
The White House has also indicated willingness to keep the child-care credit instead of making it a deduction.
Reagan pledged that his proposal would be "revenue neutral," meaning it would produce approximately the same revenue as current law. But members of Congress and the nonpartisan Congressional Budget Office have said that the plan would lose revenue, a politically sensitive issue as lawmakers stuggle to reduce the deficit.
The Treasury Department estimated when the proposal was made public that it would lose $11.6 billion over five years, a relatively small fraction of $4.7 trillion in total revenues.
But these estimates depend on projections of the economy's performance that are subject to debate.
"The futility is projecting revenues out five years," said a White House official.
A second official said the administration needed to explain better how it arrived at the revenue estimates.
Officials said that a study on which the Council of Economic Advisers is working was expected to show that the tax plan would have a "slightly positive" impact on the economy; the Treasury earlier said it would add 1.5 percent to real growth by 1995.
Reagan has refused to bend on a centerpiece of the plan -- eliminating the deduction for state and local taxes -- that has drawn criticism from politicians in high-tax states. But the president seemed to use contradictory arguments for this idea in appearances last month in high-tax New Jersey and low-tax Oklahoma.
And there have been other problems in selling the tax proposal. Meeting with businessmen in Mooresville, Ind., June 19, Reagan hesitated when asked about how his proposal would simplify the tax code. "Wow," he said, turning to chief of staff Donald T. Regan for help in answering.
When Reagan appeared in Chicago Heights, Ill., last week to push his tax plan, House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) declined to show up with him.
Rostenkowski appears anxious to see the administration move out of the spotlight, saying repeatedly that Congress needs to have the chance to make its own changes.
He has also expressed irritation that administration officials are contemplating more changes, such as restoring the deduction for two-earner families, rather than letting Congress take over the tax-writing process.