Half of the Senate's 100 members told President Reagan yesterday that his top-priority tax-overhaul plan should be laid aside "until a firm, definite budget agreement has been reached between the Congress and the White House."
A letter containing the blunt message was signed by 50 senators, including two-thirds of the Senate's Republican majority and more than one-third of its tax-writing Finance Committee.
Sen. Rudy Boschwitz (R-Minn.), who drafted the letter, said as many as 35 other senators indicated support for its sentiments, even though they did not sign it.
"I may not sign it but I may get to deliver it," Senate Majority Leader Robert J. Dole (R-Kan.) said.
Although Boschwitz said the letter was not aimed at killing tax revision or committing members to a tax increase, it appeared to underscore the slackening interest in tax revision and increasing pressure for a compromise on deficit reduction. Boschwitz announced his intention to circulate the letter and send it as a warning to the White House a month ago.
The letter reflects widespread concern that a tug of war could occur over any new revenues produced by Congress this year. Many want those revenues to be used to reduce the budget deficit but fear the money would go instead to create a tax-overhaul bill that doesn't lose money.
"If we try to do both, either we will do neither or the budget is the first thing that will fall," Boschwitz said.
The letter was made public by Boschwitz the day before the Senate Budget Committee was scheduled to begin drafting a congressional budget resolution to meet the $144 billion deficit target for fiscal 1987 set by the Gramm-Rudman-Hollings budget-balancing law.
The drafting sessions, which may last at least through next week, are expected to provide the year's first congressional showdown over taxes and defense spending, two major issues standing in the way of a budget compromise between Congress and the White House.
Budget Committee Chairman Pete V. Domenici (R-N.M.) has called for tax increases of $12 billion to $20 billion for next fiscal year and said yesterday that he has told the White House that congressional support for its proposed defense spending increase is "very weak."
In his fiscal 1987 budget request, Reagan proposed to increase defense spending by 8 percent above the rate of inflation, while cutting or eliminating many domestic programs. Domenici said he favors an increase in defense spending but added, "I'm finding it difficult to muster broad support for increasing defense spending ."
Despite Reagan's opposition to tax increases, the budget panel also will consider what Domenici called a "shopping list" of revenue measures, including increased cigarette, wine and beer levies, an oil-import fee and gasoline tax increase, and limitation on tax deductions. Also on the list is a proposal for amnesty for payment of back taxes, which continued to garner support in Congress yesterday.
Boschwitz's letter made a strong appeal for a budget compromise to avoid an estimated $38 billion in automatic spending cuts that will be required if Congress fails to meet the $144 billion deficit target under Gramm-Rudman-Hollings.
"Mr. President, we feel that you must join with the Senate and House leadership to develop a consensus on the fiscal year 1987 budget resolution," the letter said. "Therefore, until a firm, definite budget agreement has been reached between the Congress and the White House, we do not believe tax reform should be considered or debated by the United States Senate."
Tax-overhaul legislation was passed by the House last year and is pending at the Senate Finance Committee. Sen. Bob Packwood (R-Ore.), the panel's chairman, said yesterday that despite the letter he intended to go ahead with markup of the tax measure on March 19.
In related action:
*The House and Senate, still divided over a package of deficit reductions left over from last year, prepared to go their own ways over the legislation. The House began moving a bill to cut spending by $17.9 billion over three years, a shadow of the $75 billion bill that died in a House-Senate dispute last year. The Senate plans to act later on its version and attempt to reconcile differences in a conference.
*House Republicans Bill Frenzel (Minn.), John Edward Porter (Ill.) and Hank Brown (Calif.) introduced a budget plan that would meet the Gramm-Rudman-Hollings target without a tax increase by freezing defense and domestic outlays, including Social Security benefits.
*The Senate scheduled debate to begin Thursday on a balanced-budget constitutional amendment, which was approved four years ago by the Senate but which died in the House. The amendment was denounced yesterday by supporters of aid to the elderly as a "back-door" attempt to cut Social Security and Medicare