The White House threatened yesterday to veto a three-year, $85.7 billion deficit-reduction measure that is before the Senate unless three tax provisions are deleted from the legislation.
In a letter to Senate Majority Leader Robert J. Dole (R-Kan.), White House chief of staff Donald T. Regan said the administration has "serious reservations" about proposed taxes to pay for the cleanup of hazardous-waste sites and to expand the trade adjustment assistance program. He also objected to a provision that would extend the 16-cent tax on cigarettes, which is due to revert to 8 cents next month unless Congress acts to maintain the higher level.
Regan told Dole that if these provisions are not deleted from the bill "the president's advisers will recommend that he not sign it."
Dole said he agreed with Regan's objections except for his opposition to the 16-cent cigarette tax. "I think we ought to make changes" in the bill on the Senate floor, he said.
Regan also cited three other sections of the bill he found objectionable. These included a proposed disbursement of offshore oil revenues to the states that he said could cost the federal government up to $12 billion in the coming years, and changes in Medicare regulations that Regan charged would transform $7.7 billion in proposed savings in the Medicare program during the next three years into a $949 million increase in expenditures.
He also objected to a proposed moratorium on payment of penalties for erroneous welfare and Medicaid payments, saying this would undermine efforts "to deter fraud, waste and abuse" in the programs.
Because of differing interpretations of the bill's provisions, the administration says the legislation would produce only $64.6 billion in savings over the next three years rather than the $85.7 billion claimed by the Senate.
At issue in the dispute is the "reconciliation" legislation that is moving through Congress and that is designed to meet in part the revenue, spending and deficit targets that were adopted in August in the congressional budget resolution.
The budget resolution promised savings in federal programs of $276 billion over the next three years, including $55.5 billion during the current fiscal year. The reconciliation bill the Senate is considering includes changes in non-defense programs and revenue-raising measures designed to produce savings of $21.6 billion this year and $85.7 billion over the three-year period.
The remainder of the savings envisaged by the budget resolution are to be achieved through cuts in defense spending and reductions in individual approporations bills.
Regan's letter was the first explicit veto threat on the reconciliation legislation and reflected President Reagan's strong objections to tax increases as a means of reducing the soaring federal budget deficit.
One of the proposed new taxes in the bill, to be applied to manufactured goods, would raise $243 million this year and $1.7 billion over the next three years, with the money earmarked to pay for the cleanup of hazardous-waste sites. Regan said this broad-based tax would violate "the principle that hazardous-waste cleanups should be financed by those who are chiefly responsible for them."
He said the proposed import fees, designed to raise $289 million beginning in 1988 to expand assistance to workers who lose their jobs because of foreign competition, would violate U.S. treaty obligations and tax 60 percent of U.S. imports that now enter the country duty free.