Defends Proposed End to Local Write-Off : Reagan Pitching Reform Plan as Boon for Families

By GEORGE SKELTON

May 30, 1985 12 AM PT

Times Staff Writer

WASHINGTON — President Reagan began selling his new tax simplification plan Wednesday as a boon for families--”America’s most important institution”--while staunchly defending his controversial decision to push for the elimination of deductions for state and local taxes.

Echoing what has been argued for years by feminist organizations, which have opposed him on most major issues, Reagan declared that housewives “deserve to be treated with as much dignity and worth as that of any other worker. And it’s a harebrain social policy that punishes spouses who decide to stay home and take care of the children.”

Clearly believing that the support of America’s 50 million married couples is crucial to passage of his ambitious plan, Reagan told a pep rally of 200 supporters at the White House that his concern for homemakers--now “discriminated against” in the tax code--is why he has proposed making non-employed spouses fully eligible for tax-deferred savings through Individual Retirement Accounts.

Increases in IRAs

A wage earner now can set aside up to $2,000 annually in an IRA and a non-employed spouse can save an additional $250. Each would be eligible to save $2,000 under Reagan’s plan.

But while the President was attempting to direct his sales message to the nation’s families--which he hoped would lobby their congressmen--he and his top advisers also were being called upon to explain what for many taxpayers is the most controversial provision of his plan: the elimination of federal deductions for state and local income, sales and property taxes. Reagan said he was acting “in the interests of fairness.”

The former California governor also contended that these popular deductions have “been one of the major pressures pushing up tax rates for the American people”--presumably because when citizens are allowed to cushion the impact of state and local taxes by claiming them on their federal returns, it then becomes easier politically for legislatures and city councils to raise taxes.

Reagan led a chorus of Administration officials in proclaiming: “I don’t believe that we can justify a system that forces taxpayers in low-tax states to subsidize the big-spending policies of a few high-tax states. That really is taxation without representation.”

Reagan added that, contrary to what some governors and mayors who adamantly oppose the proposal are saying, his overall plan “will more than make up for the loss of state and local tax deductions for most taxpayers.”

‘Ought to Be Ended’

Treasury Secretary James A. Baker III, who will be the plan’s principal lobbyist during what is expected to be a long, protracted fight in Congress, told a news conference that the local tax deductions boil down to “a subsidy by some 35 states” for “high tax-paying itemizers” in states where taxes are high. “And that’s a subsidy we don’t think is fair and we think ought to be ended,” he said.

Baker and other Administration officials repeatedly contended Wednesday, as they began a public lobbying blitz, that 80% of America’s individual taxpayers would wind up “winners” under the President’s plan. But the Administration’s own “fact sheet” showed that only 58% would come out ahead, while 21% would break even and 21% would lose.

When asked about this by reporters, Baker said: “We’ll make the argument that people who remain the same are going to benefit because they’re going to be participating in a system that’s a lot more fair. And that’s why we would claim they’re winners. They’re certainly not losers.”

But Reagan and his advisers’ main sales point Wednesday was that the plan would help families. Besides liberalizing IRAs for housewives, they pointed to provisions increasing the personal exemption for every man, woman and child from $1,040 to $2,000, and raising the standard deduction for a couple filing a joint return from $3,670 to $4,000.

‘Moral Core of Society’

“The family,” Reagan said, “is the moral core of our society, the repository of our values and the preserver of our traditions . . . the safe haven where we’ve taught charity, generosity and love. . . . In raising the next generation of Americans, the tired breadwinner and the exhausted homemaker are doing the essential work of our society.”

When told by reporters that a magazine had estimated that he and his wife would save $28,000 in federal taxes under his plan, Reagan replied: “I think that just points out for everyone how advantageous (it) is.”

But when a reporter mentioned that middle-class taxpayers would not save nearly as much, the President noted: “Well, they don’t pay as much.”