Senate Finance Committee members ended their weekend retreat yesterday predicting that they will produce a tax-overhaul bill this year, but they specifically rejected both the House-passed legislation and President Reagan's proposal as models.
Their decision could make it harder for the committee to adopt a comprehensive rewrite of the tax code, especially if members use the existing set of tax laws as a starting point. That approach would require the committee to vote to change the existing system. If Reagan's plan or the House bill were used as the starting point, those who want to preserve specific tax benefits would have to win a majority in the committee.
But the committee chairman and several senators said they were heartened by the 24 hours they spent sequestered in Berkeley Springs, W.Va.
"I know we can get a bill of some kind" that can get 14 to 16 votes on the 20-member committee "and will be bipartisan," Chairman Bob Packwood (R-Ore.) told reporters after returning to Washington.
Sen. David F. Durenberger (R-Minn.) said that before the retreat he did not expect the committee to produce legislation that would cut tax rates and curtail deductions, but "by six or seven last night Friday , everyone was confident we'll get a tax bill."
Packwood said the sessions helped him sense "what is acceptable" to the committee. Members voted overwhelmingly against using the tax bill passed by the House last December or the Reagan plan as a starting point. Instead, they asked Packwood to develop a consensus proposal with ranking minority member Russell B. Long (D-La.).
If that fails, Packwood said he would use existing tax law as a basis for bill-writing.
Committee members disagreed, however, on some specifics of a tax bill. Most were willing to consider terminating the deduction for state sales and personal-property taxes, but Sen. Daniel Patrick Moynihan (D-N.Y.) said that move would "jeopardize the legislation here and in the House." The House legislation leaves all deductions for state and local taxes intact.
Packwood said four or five committee members wanted to use the legislation to raise taxes to reduce the deficit; three other sources present when straw votes were taken on the issue said about half of the 18 or 19 senators present wanted higher taxes. Another source described it as a "substantial minority."
Enough favor a tax increase that "there should be some concern that the United States Senate is more committed to deficit reduction than we are to tax reform," one source who attended the meeting said.
"Half or more of the committee is saying we are going to have to raise revenue to reduce the deficit and half want this bill to be used to do it," said another source. "But there was a feeling we will start out with a revenue-neutral bill."
Senators at the retreat also voted to ask Packwood and Long to negotiate with House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), whose panel wrote the House bill, to postpone the bill's effective date so businesses can plan investments.
The implementation date in the House bill is Jan. 1, 1986. Uncertainty over whether the Senate will make the measure retroactive is already affecting bond markets and capital spending. Finance committee members said they want the measure to take effect at the earliest on the date it is signed by President Reagan, or on Jan. 1, 1987.
Packwood said members had generally agreed they should begin by trying to reduce the top personal-income tax rate to 35 percent, as Reagan wants. The current top rate is 50 percent, and the only way to reduce rates while bringing in the same amount of revenue is to sharply limit corporate or individual deductions.
Packwood said the committee may eventually turn to other means to reduce rates and meet other Reagan goals such as more generous business investment incentives. "But the president has made it clear he was vehement in his opposition to new taxes," Packwood said. "On a scale of one to 10, he was minus five."