Senate Majority Leader Robert J. Dole (R-Kan.) said yesterday he is willing to use a one-time revenue windfall from the tax-overhaul bill to help meet next year's deficit target, a maneuver that could head off a confrontation between Congress and the White House over an election-year tax increase.
But White House spokesman Larry Speakes said yesterday that President Reagan would not accept use of revenues from the tax-overhaul bill to meet next year's deficit target.
Dole acknowledged that a free ride on taxes this year could increase Congress' deficit problems in the future but said it could "take care of the budget resolution" dilemma for this year.
"My own view is we should take one year at a time," said the majority leader, who is in a tight spot on the tax issue because the Republican-controlled Senate has approved a budget that meets the Gramm-Rudman-Hollings deficit target for fiscal 1987 only by including tax increases opposed by Reagan.
The prospect of a one-year windfall arises because the tax-overhaul bill approved by the Senate Finance Committee earlier this month is expected to produce a revenue surplus the first year of up to $22 billion, according to preliminary administration calculations.
But the plus would be offset by minuses the following couple of years, meaning that revenues used to meet deficit reduction the first year would have to be made up somehow if targets for future years are to be met.
Tax-revision legislation passed last year by the House is also expected to provide a windfall the first year, although it would be smaller, probably no more than $7 billion, according to the House Ways and Means Committee.
A compromise somewhere in between would be more than enough to cover requirements for new revenues in the fiscal 1987 budgets approved by the House and Senate, which amount to about $10 billion after accounting for miscellaneous revenue increases that have been enacted.
If a compromise tax bill is enacted by late summer, the extra revenue would simply become part of the deficit calculation for next year. Presumably this would help Congress meet its Gramm-Rudman-Hollings target without need for tax increases, which Reagan has vowed to veto and House Democrats are reluctant to enact without presidential backing.
The extra revenue from the tax-overhaul bill in the first year comes about because tax deductions, credits and other preferences would be phased out before lower tax rates take effect. But the bill's provisions, including potentially expensive early "transition" costs, will not be firm until after Senate floor action and negotiations on a final compromise by a conference committee.
Until yesterday, the administration had stressed that the bill be revenue-neutral over five years, giving lawmakers the impression that it did not object to use of a revenue windfall in the budget projections for next year.
Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) and other congressional fiscal experts say they are concerned about implications for future years, according to aides. Dole also indicated concern, saying, "I'd be willing to do that [apply the windfall to next year's deficit]; happy may not be the word."
Meanwhile, a House-Senate conference to work out a fiscal 1987 budget compromise was scheduled to begin today, although work is not expected to be finished until after Congress returns from a 12-day Memorial Day recess on June 2.