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Cutting taxes and the budget

Long before Reagan's landslide victory, his task forces were digging into the biggest problem that would face the new President: coping with the battered economy. The various panels put together their findings and last week presented a unanimous 20-page report to Reagan for his expected approval. Among their recommendations:

> Sticking to the Kemp-Roth tax cut timetable, which would trim personal income levies by 10% a year for three years. While some of Reagan's more cautious advisers had earlier urged him to spread the reductions over five years, he insisted on the original proposal. But Reagan left room to change his position if the cuts fail to stimulate economic activity and turn out to be inflationary.

> Reducing from 40% to 30% the amount of income subject to the capital gains tax. Asserts a top Reagan adviser: "It'll go through Congress like owl's grease."

>Throttling proposals to allow business to speed up depreciation of plant and equipment. For example, instead of allowing firms to write off a new building in ten years, the plan would raise the figure to 20. Reason: the first proposal would cost too much in tax revenue.

> Encouraging personal saving and investment by permanently excluding from taxation the first $200 that individuals earn from interest and dividends and $400 for couples filing joint returns. Congress voted for this tax saving to start in 1981, but for two years only. Reagan's advisers want to make the exclusion permanent.

With sizable tax cuts, the new Administration will be all the more pressed to cut spending. When the outlay was estimated to be $633 billion for fiscal 1981, Reagan advisers considered cutting 2%, or about $13 billion. Now the budget is estimated to stand at $653 billion, and a 2% reduction would not be nearly enough to prevent further inflation, especially if Reagan adds to defense spending. As a start -- and it would be only a modest one -- his advisers want to take a substantial slice out of the $8.9 billion Government travel budget and the $10 billion food-stamp program.

Above all, Reagan hopes to convince Americans that he is going to follow a steady policy of combatting inflation, instead of the unsettling zigzags of the Carter Administration. Says Caspar Weinberger, Reagan's top budget adviser: "The first year is terribly important in setting the tone."

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