With President Reagan still withholding judgment, the House Ways and Means Committee yesterday brushed aside a Republican alternative and moved its own tax-overhaul package a step closer to a floor vote next week.
The Democratic proposal now goes before the House Rules Committee, which is expected to allow the Republicans to offer their alternative on the floor. That proposal, unveiled yesterday, would provide a smaller tax cut for individuals and a smaller tax increase for business than the Ways and Means bill.
Ways and Means Chairman Dan Rostenkowski (D-Ill.) said after the 28-to-8 vote that advanced his tax-overhaul bill that Reagan will have to "commit himself" to get the measure through the House.
"I'd like to see him on board as quickly as possible," Rostenkowski said. "I do, however, feel it can't be a tacit kind of endorsement."
White House officials, however, said Reagan primarily wants to keep the process of revising the tax code moving. They were not sure he needs to endorse a particular proposal in order to do that.
The president is unlikely to speak up for a particular tax plan while Republicans are trying to find a tax package they prefer over the Democratic bill, the officials said. Instead, Reagan might speak in favor of the elements that he likes in each bill.
In a meeting yesterday morning with Republican congressional leaders, Reagan said he wanted to "listen" to their concerns but was not ready to make a decision about the Ways and Means bill, according to several legislators present. Reagan also said, according to lawmakers, that he wanted to "keep the process moving" on tax revision, but was not specific.
After the meeting White House spokesman Larry Speakes said that Reagan had not reached a decision because studies on the Ways and Means bill, by the Council of Economic Advisers and the Treasury Department, had not been completed. They are expected in the next day or two.
The Republican tax package, which committee Republicans said had been endorsed by the House GOP leadership, is similar to both the Democratic proposal and the original Reagan plan in that it would reduce corporate and personal tax rates while eliminating or curtailing numerous deductions and credits. But it would have a top personal tax rate of 37 percent rather than the 38 percent in the committee bill. The current top rate is 50 percent. Reagan had proposed a top rate of 35 percent.
The GOP package also has a lower corporate rate -- 33 percent instead of 36 percent -- but that reduction would be phased in over six years. The alternative would raise the personal exemption to $2,000 for 90 percent of taxpayers and, unlike the Ways and Means bill, would permit nonworking spouses to contribute up to $2,000 to a tax-deferred Individual Retirement Account just as workers may do.
Perhaps most important from the standpoint of individual taxpayers, the Republican package would limit the extent to which all itemized deductions, except home mortgage interest, could be taken. Taxpayers would have to combine all their itemized deductions, such as those for state and local taxes and charitable contributions. They then could deduct fully the first $1,000, plus 75 percent of the remainder.
The GOP plan also would eliminate deductions for sales taxes and for interest on credit-card debt and other consumer debt above $500 for a single taxpayer and $1,000 for a married couple. The proposal would restore tax benefits for the oil and gas industry that the Democratic bill would end, and would permit a 5 percent tax credit for investment in U.S.-made equipment. The current, broader investment credit is 10 percent. The committee would repeal it.
Ranking committee Republican John J. Duncan (Tenn.) said the alternative is more "pro-family" and would stimulate economic growth. Committee Democrats said it would deny Americans $35 billion of the $140 billion tax cut they would get over five years as a result of the Ways and Means package.
Senate Majority Leader Robert J. Dole (R-Kan.) said Reagan "wants to keep the process alive, which would indicate he is not going to reject the House Ways and Means package." He said the president wanted to look at the GOP package and "may endorse them both."