Republican-led Senate budget negotiators maneuvered yesterday to win support for tax increases from President Reagan and House Democrats by proposing a budget compromise that would tie some of next year's additional spending for defense to a tax increase.
But the White House rejected the idea and House negotiators reacted coolly, casting doubt on whether it will break the impasse over defense and taxes that is holding up agreement on a budget for fiscal 1987.
At his news conference last night, Reagan reaffirmed his opposition to tax increases. "I'll say it as often as it takes -- I'll veto any tax hike that comes across my desk," he said.
Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) aired the compromise proposal, which has not been drafted in detail, after telling the conference that White House chief of staff Donald T. Regan had told him that Reagan would not accept tax increases, even to support defense spending increases he wants.
"There's been no conversion" by Reagan to tax increases, Domenici said, even if they are tied directly to defense spending. But Domenici said he will nevertheless draft a compromise along these lines for submission to the conference, perhaps today. He did not indicate how much defense spending would be tied to tax increases, though he said some new revenues probably would have to be set aside for deficit reduction to meet the Gramm-Rudman-Hollings deficit target of $144 billion for next year.
There is increasing concern among congressional budget leaders that next year's deficit will be higher than has been anticipated, increasing pressure for tax increases to avoid the across-the-board spending cuts required if the deficit exceeds the target by $10 billion or more.
Budgets previously approved by the Senate and the House call for $45 billion in tax increases over three years, although the House stops short of pledging to pass the necessary implementing legislation unless Reagan supports the measure. The three-year total includes about $13 billion in new taxes for next year, or roughly twice what the president wants.
Both budgets also provide for less defense spending than Reagan wants. The president proposed $320 billion in new defense spending authority. The Senate approved $301 billion, the House $285 billion.
The Senate taxes-for-defense proposal is expected to allow room for defense spending close to what the Senate proposed so long as Congress passes tax-increase legislation and Reagan signs it.
"If the president doesn't want to do the taxes . . . we aren't going to be able to do the defense number," Domenici said.
But an immediate obstacle seemed to be House qualms about raising taxes to finance more spending for defense, which Democratic leaders have opposed. Moreover, 150 Democratic members earlier this week signed a letter opposing any "substantial" increase for defense under any circumstances.
"We just can't do it raise taxes for defense . . . . I don't think the House would support it," House Budget Committee Chairman William H. Gray III (D-Pa.) said. "I don't think it's a fair way of doing it," said Rep. Marty Russo (D-Ill.), suggesting that a portion of the revenue should be used "to fix some of our domestic problems."
Earlier in the day, however, Gray suggested a contingent tax increase that would be split roughly 50-50 between defense and deficit reduction as a "possible idea" under consideration by budget leaders in both houses.
"If he Reagan wants defense and he wants deficit reduction . . . , it's up to him," said Gray. However, he also contended that the administration continues to believe it can increase defense spending and meet the Gramm-Rudman-Hollings target without raising taxes. "The White House still believes it," Gray said. "They're still smoking that supply-side stuff."
Because of sluggish economic growth and lower-than-anticipated revenues, deficits in both the House and Senate budgets probably now exceed the $144 billion target, Gray added. He said the House deficit is now about $147 billion, the Senate about $153 billion.
In response to Reagan's news conference remarks, Domenici said the president cannot meet the Gramm-Rudman-Hollings deficit target and increase defense spending without tax increases. He estimated that failure to pass a budget with tax increases would trigger across-the-board spending cuts of about $15 billion in domestic and defense outlays for next year, involving an even larger cut, about $25 billion, in long-term appropriations for defense. "He can't have it both ways without an increase in taxes," said Domenici.