President Reagan, in a clear warning to House tax-writers, expressed dissatisfaction yesterday with the direction taken by the House Ways and Means Committee in overhauling the tax code.
"We need the kind of tax reform that we originally proposed and not with some of the waterings-down that are taking place as they discuss it up there," Reagan said in a speech to supporters celebrating the first anniversary of his reelection.
White House spokesman Larry Speakes joined in the criticism, telling reporters that Reagan is "troubled" by "certain aspects" of the tax bill under consideration.
Speakes would not elaborate, but administration officials have expressed concern privately in recent days that compromises accepted by committee Chairman Dan Rostenkowski (D-Ill.) are so extensive that the top personal tax rate will have to be considerably higher than the 35 percent proposed by Reagan. The current top rate is 50 percent.
One such compromise, the officials have said, involves the probability that Rostenkowski will opt to retain the deduction for state and local taxes.
"This is a clear signal that if they give away state and local deductions , raise the rates and step across the lines we've drawn, they can't count on the president," a senior administration official said.
"The president was saying publicly what we have been saying and signaling privately: that they better not count on our support" if the committee continues restoring tax breaks and cannot stick to the 35 percent top rate.
Reagan's remarks were his first public criticism of the House measure, even though it has been apparent for several weeks that the bill could violate the principles of low rates and "revenue-neutrality" that Reagan has said are essential to tax revision.
Rostenkowski, working with the panel on the tax legislation all afternoon, could not be reached for reaction.
But Rostenkowski has placed great importance on Reagan's silence about the committee's work, contending that it is vital to overhauling taxes in a nonpartisan fashion.
A Rostenkowski aide said the president's remarks did not appear to be a violation of that "vow of silence."
"Obviously, the Treasury would like to have their bill delivered by return mail. That's not possible," the aide said.
Other committee members said they were undisturbed -- and perhaps even heartened -- by Reagan's comments.
"Great, let's drop it," Rep. James R. Jones (D-Okla.) said. "If he's not for it, let's quit."
Jones and others noted that the tax proposal submitted by Reagan in May included far more tax breaks for various groups than did the more "pure" plan proposed almost a year ago by the Treasury Department.
Other committee members said Reagan was correct in his assessment of the House legislation. During the past month or so of tax-writing, new breaks or compromises for such industries as timber, banking, farmers, small business and beneficaries of tax-exempt bonds have been added to the legislation.
Although the bill as written thus far would produce about the same amount of revenue as the current tax code and not increase the federal deficit, the toughest votes seem to lie ahead.
Retaining the deduction for state and local taxes would reduce revenue by $65 billion over five years, making it nearly impossible that Reagan's proposed rates of 15 percent, 25 percent and 35 percent could be achieved if the deduction were not restricted.
"An objective analysis of the process could be fairly defined as watering down the president's proposal," Rep. William M. Thomas (R-Calif.) said.
Rep. Ronnie G. Flippo (D-Ala.) likened Reagan's remarks to the White House effort to clarify statements he had made about his Strategic Defense Initiative. Speakes had called those statements an "imprecision."
Referring to Reagan's remarks about the tax legislation, Flippo said, "Perhaps it was another presidential imprecision."