President Reagan, trying to pressure reluctant Republicans, will tell House members in a letter to be delivered today that the effort to overhaul the tax code will be "dead for several years" if they defeat a major tax bill this week, White House sources said yesterday.
Reagan's warning was echoed publicly yesterday by Treasury Secretary James A. Baker III, who said on ABC News' "This Week With David Brinkley" that a House defeat would mean "tax reform is dead . . . . We're not going to have an opportunity to revisit it in the Reagan presidency."
The letter and the Baker statement are part of an effort to step up the pressure for approval this week of either a Republican alternative tax bill or, if that is defeated as expected, a bill written by Democrats that would lower rates for individuals and business while eliminating many tax advantages.
The administration also is attempting to respond to those lawmakers and lobbyists who have been saying that Congress should start over on tax revision next year, rather than accept the bill produced by the House Ways and Means Committee under Chairman Dan Rostenkowski (D-Ill.).
The president also is planning today to begin calling those Republican lawmakers who the White House has targeted as potential backers of the Ways and Means bill once the Republican alternative is rejected in the Democratic-controlled House. Later in the week, Reagan personally may lobby these members at the White House, sources said.
Rostenkowski, also appearing on the ABC program, said he expects Reagan to be "very forceful" in supporting his committee's bill once the GOP alternative is defeated.
The major obstacle to passage is opposition from members of the president's party in the House, where only a handful of Republicans can be counted on to support it.
House Minority Leader Robert H. Michel (R-Ill.) said yesterday on the ABC program that he will vote against the bill because "this [legislation] is not good mileage for Bob Michel and the majority of Republicans as they represent their individual districts out there." Michel is from Peoria, where many depressed midwestern companies have complained of the Ways and Means bill's business tax increases.
The Ways and Means Committee, controlled by Democrats, wrote a bill that would essentially raise business taxes $140 billion by eliminating many popular deductions and credits, then give that much of a tax cut to individuals by lowering rates.
The bill does not cut individual tax rates as much as Reagan wanted and does not follow his recommendation to end many individual tax breaks such as the federal deduction for state and local taxes. But White House strategists decided that the bill is the only vehicle to keep the tax revision effort moving.
Reagan, in his letter, asks representatives to support either the Republican alternative bill or the Ways and Means bill. Baker also stressed that the White House will back the Ways and Means bill if the GOP substitute fails.
"It's fair to say the president feels it would be fine if the Republican alternative passed . . . but if it does not, we would like to see Republicans vote for the Ways and Means Committee bill," Baker said. He said both bills are "in some respects an improvement on the situation we have now," and represent the only chance of getting tax overhaul to the Senate.
In his letter, Reagan warns that failure to approve a tax bill will leave the existing code with inequities, complexities and "anti-growth" economic impact, a White House official said.
Reagan also says that the vote, expected at midweek, is "a vote whether or not to sustain the process of tax reform," according to officials familiar with the letter.
According to a White House strategist, the Republicans who have vowed to oppose the Ways and Means bill, including Michel, are not lobbying GOP members to join them. Rather, they are simply "casting an individual vote" because of their personal objections to features of the committee bill.
Senate Majority Leader Robert J. Dole (R-Kan.) said on NBC News' "Meet the Press" that if the bill reaches the Senate, "I think we can do a lot better" by restoring many of the Reagan recommendations including taxation of fringe benefits such as health insurance premiums.
Dole said the House committee did not lower tax rates enough, did not increase personal exemptions enough and should not have "caved in" to states seeking continued deductions for state and local taxes.
"I don't think they had to give that away entirely," he said. He suggested, however, that the states' victory in Ways and Means will make it more difficult for Senate tax-writers to delete the deduction. The Senate may look at limiting the deduction to 75 percent or 50 percent, he said.
Dole also said that the Senate will consider taxing health insurance and other currently untaxed fringe benefits, an approach rejected by Ways and Means.
Although Dole, former chairman of the Senate Finance Committee, is the leader of the GOP in the Senate, current Finance Chairman Bob Packwood (R-Ore.) may not agree with his predictions for tax overhaul in the Senate. Packwood is a strong supporter of tax-free fringe benefits, such as health-insurance premiums paid by an employer on behalf of workers.
A spokeswoman for Packwood said that the senator has repeatedly said that once the House restores a tax break from the Reagan proposal, as on fringe benefits and the retention of the state and local tax deduction, it is unlikely the Senate could reverse that action.