President Tells House GOP: ‘No, No, No’ : Rostenkowski Still Holds Reagan Tax Hike Possible

WASHINGTON — A boost in the federal gasoline tax could help reduce the huge budget deficit, Rep. Dan Rostenkowski (D-Ill.) said Wednesday, predicting that President Reagan could be persuaded to accept tax increases.

The “Baker boys”--White House Chief of Staff Howard H. Baker Jr. and Treasury Secretary James A. Baker III--will be able to convince the President of the need for additional tax revenues, said Rostenkowski, chairman of the House Ways and Means Committee, during a breakfast meeting with The Times’ Washington bureau.

Anti-Tax Rhetoric

However, the President maintained his staunch anti-tax rhetoric in a visit to Capitol Hill, meeting privately with House Republicans. According to White House spokesman Marlin Fitzwater, Reagan told the legislators: “My answer to the tax hikers--and I hope I can count on you to back me up--is ‘no, no, no.’ ”

In addition, Reagan attacked congressional Democrats for failing to produce a budget plan and urged Republicans to stick with his 1988 spending proposal, saying: “The motto is ‘no fudging.’ ”

Meanwhile, Democratic members of the House and Senate Budget committees worked in closed session late Wednesday, struggling to draft budgets that would offer $18 billion in spending cuts and $18 billion in new revenues.

‘A Tentative Agreement’

Members of the House committee broke up shortly after 11 p.m. and Chairman William H. Gray III (D-Pa.) announced: “We have reached a tentative agreement.”

He refused to disclose details of the plan but called it “a strong, credible package that moves in the right direction with cuts in spending that are real but fair.” Committee members said it would be ready for consideration today.

As their plan was shaping up late Wednesday, it was still following the formula outlined by House Speaker Jim Wright (D-Tex.)--that is, $18 billion in spending cuts, evenly divided between the military and domestic programs and $18 billion in new revenues, most likely from higher taxes on such things as gasoline, cigarettes and liquor.

Although the Democrats control both houses of Congress, they are having considerable difficulty devising a budget for fiscal 1988, which begins Oct. 1.

While they spar with the Republicans and the President in public, liberal and conservative Democrats are wrangling among themselves in private over the merits of defense programs versus domestic spending.

‘Retired to Skybox’

Gray said Wednesday that “the President has dropped his budget on the field of play and retired to the skybox.

“What we see is members of his party are essentially doing the same thing here on Capitol Hill, saying: ‘We’re going up into the skybox and watch the fun and games from up above.’ ”

For the Democrats, the budget game was being played behind closed doors--but muffled shouting could still be heard occasionally.

The final budget “will not be one anybody’s going to like,” Rep. Marvin Leath (D-Tex.) said as he emerged from the meeting.

Democrats are convinced that $18 billion in new tax revenues will be essential to their budget plan. Neither the President nor Rostenkowski, whose committee writes the revenue laws, wants to tamper with the lower personal income tax rates set by the 1986 tax revision law.

If tax rates are politically untouchable, the leading candidates to produce more revenues are federal excise taxes, or taxes on commodities.

Large sums of money could be produced from increased excise taxes, according to a study by the Congressional Budget Office. Doubling the gasoline tax, now 9 cents a gallon, could produce $9 billion a year. Doubling the cigarette tax, now 16 cents a pack, would yield $3 billion.

Opposition to Tax Hike

Significantly, Treasury Secretary Baker, while emphasizing Administration opposition to any increase in tax rates, has not taken a public stand on the question of gasoline or cigarette tax hikes.

Rostenkowski believes that the Treasury secretary and White House Chief of Staff Baker can be his allies in persuading the White House to accept tax increases.

“I’m hoping that the flavor develops at the White House and that they can talk to the President,” Rostenkowski said. “I really feel that Howard Baker is going to be the key in everything that we’re going to be doing for the next 18 months.”

Gasoline taxes can also be sold politically as a conservation measure, Rostenkowski noted.

‘Big, Luxurious Cars’

“We’re up to 65 m.p.h. and we’re getting in more big, luxurious comfortable cars,” he said. However, he added: “I don’t want anyone to think that the menu is limited” to the gasoline tax.

Leath said that energy taxes in general are distasteful but that, if one is deemed necessary, an oil import fee would be better than a simple gasoline tax hike. Such a fee would help raise the price of domestic petroleum, helping the depressed U.S. oil industry.

The House Budget Committee will propose its fiscal 1988 spending plan, leaving Rostenkowski’s committee the difficult task of picking and choosing among tax alternatives.

The same procedure is followed in the Senate, where the Budget Committee is drafting a spending plan and the Finance Committee will determine the details of tax changes.

Staff writer James Gerstenzang contributed to this story.