President Reagan told Senate Republicans at a breakfast meeting yesterday that he opposes the inclusion of a business transfer tax or an oil import fee in the tax revision plan the Senate will consider this year, administration and congressional officials said.
Reagan also said he was "disturbed" that the House had discarded his plan to eliminate the federal deduction for state and local taxes, and suggested restoring it in the Senate to offset the additional business tax breaks he wants, presidential spokesman Larry Speakes said.
The president's comments came as the early jockeying over this year's legislative priorities intensified. Reagan told congressional leaders on Tuesday that he would not accept tax increases to reduce the deficit, and yesterday he appeared to lay down another challenge to Congress on tax revision, his other major domestic policy priority for the year.
The business transfer tax and oil import fee have been discussed by key senators as a way to make up revenues that would be lost because of Reagan's other demands for changes in the House-passed tax revision bill, as well as changes the senators may want.
Reagan reiterated his demands yesterday, saying he wants a top personal tax rate of no more than 35 percent, the personal exemption doubled for low- and middle-income families, and restoration of business tax breaks for capital formation, among other things.
Reagan has insisted that the tax bill remain "revenue neutral," meaning it should not produce more or less money for the government than current law. Since Reagan's demands would lose revenue, administration and congressional strategists have been looking at possible taxes to make up the difference and keep the legislation from enlarging the deficit.
One option is the business transfer tax, sponsored by Sen. William V. Roth (R-Del.). This is a variant of the "value-added tax," used in Britain, under which companies pay a percentage tax on the difference between what they pay for products and services, and what they sell them for. Roth said yesterday that he is convinced Reagan will come around and support his proposal once it was explained to him.
Roth said he plans to offer the tax during the Senate Finance's Committee's consideration of tax overhaul, and that the proposal has received "a lot of interest" and has "a good chance."
But, answering a question about the business transfer tax from Senate Finance Committee Chairman Bob Packwood (R-Ore.) yesterday, Reagan said he is "not much in favor of that," according to a White House official who was there. Reagan cited the British experience and suggested, without being specific, that revenue could be raised by "closing loopholes" in the U.S. tax code.
Sen. Malcolm Wallop (R-Wyo.) urged Reagan not to "foreclose" the Senate's options in structuring the tax bill, the official said, but Reagan "did not leave any room" for acceptance of the tax.
Reagan also rejected an oil import fee as part of the tax revision bill in response to a question from Senate Budget Committee Pete V. Domenici (R-N.M.). He had earlier rejected the oil tax to reduce the deficit.
Reagan does not intend to give Congress a list of tax increases to offset the revenue losses from his proposals, except for eliminating the state and local tax deduction, Speakes said.
Packwood told a breakfast meeting of reporters that one possibility would be to eliminate the deductibility of sales and personal property taxes at the state and local level, while retaining the deduction for income and real-property taxes.
He also said that without Reagan's active support, "there will be no taxes, not a whisper."
The only scenario under which new taxes would be possible, Packwood said, would be if economic projections in the fall indicate spending cuts would fall short of the deficit targets.
This weekend, members of the Finance Committee will spend 24 hours in a private "retreat" in Berkeley Springs, W.Va., to discuss tax revision.
Packwood said he expects the sessions to make clear to Treasury Secretary James A. Baker III and other officials which tax issues are of most concern to Finance Committee members