Democrats craft alternate tax cuts

The Democrats in Congress are refusing to stampede. They have been stung by President Reagan's rebuke for footdragging on taxes and sleight of hand on budget cuts. But they reason that if they can hold their ranks together long enough, they come up with a tax bill that can "win big" in committee and possibly win narrowly on the House floor.

Democtrats concern over how hard Mr. Reagan will drive to defeat them is tempered by their awareness that over the long haul, he will need their support -- even as opponents.

The honeymoon with Congress may seem to be strained with charges of "demagoguery" sounding from both ends of pennsylvania avenue. But the White House and Congress are basically groping toward a workable adversarial relationship, some observers suggest.

"IF I were Reagan, I'd feel I had victory [on the tax issue]," says William K. Muir, a University of California- berkeley political scientist who followed Reagan's career in sacramento. i think he'd like to give something back to the Democrats. Reagan doesn't like to cultivate permanent animosity. He's good at cultivating former adversaries."

Indeed, the morning after his press conference barbs aimed at House Speaker Thomas P. O'Neill jr. (D) of Massachusetts, the President made a fence-mending telephone call to Represantative O'Neill. "He and I have had a good relationship, and I want to continue it," the President said later.

As governor of California, Reagan dealt well and straightforwardly with opposition leader Bob Moretti in the Legislature, Mr. Muir says. When Reagan took an issue seriously -- such as state tax reform and welfare reform -- and when the opposition was well organized and had objectives, Reagan could make concessions to win overall goals.

In Washington as President, Reagan also has been greatly helped, not hindered , by Democratic opposition. HE got his way almost totally on the budget-cutting battle.

And on the tax bill, even the Democratic counter- version will contain most of what the administration wanted -- and other items like a reduction in the marriage penalty, which the administration didn't dare ask for itself. The Democrats on the budget and tax issues have helped cast the programs more in line with moderate Republican preferences.

In the immediate tax fight, the Democrats have not been bargaining the way Reagan likes to bargain. House Ways and Means Committee chairman Dan Rostenkowski (D) of Illinois is a veteran of the Richard J. Daley Chicago school of politics, where negotiating never takes place in public.

"If I were Reagan, I'd be a little nervous," says Rep. Donald Pease (D) of Ohio, a Ways and Means Committee member and a soldier in the Democratic whip organization. "There isn't an ironclad agreement to finish a bill by August recess. And the Democrats might come out with a more attractive bill."

The Democrats' tax bill will offer a two-year tax cut, unlike the White House's three-year version. And the Democrats will likely include offsets to higher social security taxes, which will benefit middle-income families.

"On charts, our bill will look better in every tax bracket up to $50,000," says Congressman Pease. "We hope ours will cover not only bracket creep, but also the social security tax increase. The Reagan tax cut, apart from bracket creep and social security, is even, percentagewise.

"With social security increases, those earning under $10,000 would get a net tax increase in 1982 from Reagan's proposal. Those earning over $200,000 would still get a $20,000 tax decrease in 1982. This would be very hard to explain to my constituency."

The Democrats hope to convince their colleagues and the public that moderate wage-earners would get a better break with the Democratic version. They may try to gain business support by reducing marginal corporate tax rates instead of the accelerated depreciation route. And in broad economic terms, they will argue their package will have a safer impact on future deficit and budget-cut pressures.

"Half the Democratic conservatives want to vote for a Democratic -- certainly if charts show our tax cuts are more beneficial to constituents," Pease says. For the last 10 days, the Democratic leadership has been trying to get members to hang loose until they can compar e the programs.