Tax-revision legislation approved by the Senate Finance Committee last week might increase tax revenues in the first few years after enactment, helping to reduce the budget deficit, Treasury Secretary James A. Baker III said yesterday.
Senate Majority Leader Robert J. Dole (R-Kan.) agreed that the measure might bring in more taxes than the current system, initially creating a "revenue surplus which would take care of any budget problems we might have."
Both men, appearing on NBC's "Meet the Press," added that the bill, a sweeping rewrite of the tax code that reduces rates and curtails deductions, would bring in the same amount of revenue as the current tax code over five years.
Rate cuts in the Finance Committee bill and in legislation approved by the House would become effective six months after many deductions and credits are eliminated. Many taxpayers who would receive a tax cut under the bill after it is fully phased in might thus experience an increase in the first year.
"The bill is revenue-neutral over the entire budget period. The effect will be that there is an increase in the first year," Baker said.
He said President Reagan continues to oppose reducing the deficit by raising taxes and opposes the budget resolution approved last week by the House Budget Committee because it does not include enough for defense spending and projects too high a tax increase.
The administration opposes using new revenue other than the $6.3 billion proposed in Reagan's fiscal 1987 budget, Baker said.
He and Dole also said they will not support amendments to restore the full deduction for tax-deferred Individual Retirement Accounts when the tax bill comes before the full Senate, probably in early June.
The bill permits full IRAs for workers not covered by other pension plans but would repeal the deduction for deposits of as much as $2,000 a year in IRA accounts. Interest earned on those deposits would remain tax deferred until withdrawn at retirement.
Dole noted that people can save for retirement on a tax-delayed basis through company-sponsored 401(k) plans, and Baker said several times that the administration "wants to move a package." The House bill would not restrict IRAs.
Senate amendments are expected that would restore low tax rates for capital gains and restore the full deduction for business meals rather than limit it to 80 percent, among other things. Dole, who has oil interests in his state, and Baker, from Texas, defended an exception for oil and gas investments in a provision cracking down on tax shelters.
However, Senate Finance Committee Chairman Bob Packwood (R-Ore.), appearing on ABC's "This Week with David Brinkley," said he will support an amendment to remove the exceptions.
With so many amendments to restore deductions in the offing, Deputy Treasury Secretary Richard G. Darman, also on the ABC program, warned of danger posed by a "killer coalition" of senators who oppose various specific provisions of the committee bill.
Darman and others said, however, that the chances of congressional passage of tax overhaul probably are better than they have been during the 18 months that it has been Reagan's top domestic priority.
House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), predicting that a conference committee would marry the best provisions of each bill, said, "There is an agreement among members that tax reform is going to pass.