Senators near accord on budget HD: Amendments fail on tax rate, gasoline


WASHINGTON -- The Senate handily rejected last night an attempt to increase taxes on high-income earners, as Democratic and Republican leaders struggled yesterday to win support for a deficit-reduction package that would cut Medicare benefits and raise taxes paid by almost all Americans.

On a 67-32 vote, lawmakers rejected a rank-and-file Democratic proposal to restructure a sweeping deficit-reduction package so that its costs would fall more heavily on the well-off than on the middle class.

Later, on a procedural tally of 59-40, lawmakers effectively killed an amendment to remove a proposed increase in the federal gasoline tax from the deficit package.

The deficit proposal thus survived two critical tests of support on the Senate floor. The vote left intact a compromise plan that would double gasoline taxes, cut Medicare benefits and increase taxes on the rich at a lower rate.

If, as expected, the package is endorsed by the Senate sometime today, lawmakers will begin negotiations with the House in an effort to come up with a compromise bill.

President Bush has said he would veto the House bill, which differs sharply in many respects from the package before the Senate.

The first of the Senate amendments rejected last night, which would have imposed higher income tax boosts on the highest income earners while cutting the contemplated gasoline tax increase in half and easing proposed cuts in Medicare and agriculture, met with similar White House opposition.

The administration also fought a Republican rank-and-file proposal to strip the package of a provision doubling the federal gasoline tax.

White House Budget Director Richard G. Darman, speaking of the Senate package, said, "If it goes down, you have to go back to square one."

With a threatened shutdown of the federal government looming at midnight Friday, few lawmakers wanted to consider that possibility. But their efforts became ensnared in the fight to remove the gas tax increase -- a move that would have robbed the package of $43 billion in revenues.

The Senate's package would increase the federal government's income largely by raising a variety of taxes paid by almost everyone. The House bill, meanwhile, would place the heaviest burden for its tax increases on the upper class -- raising income taxes levied on those with the highest paychecks, while hitting virtually all wage-earners with a one-time tax increase.

"The White House is ready to receive [a] bipartisan package similar to the Senate package," said Mr. Bush's chief of staff, John H. Sununu. "Get it to the president's desk, and he'll sign it."

Armed with the administration's endorsement, Democratic and Republican leaders in the Senate spent much of the day in a frantic effort to corral sufficient support to adopt the bill as written last week by the Senate Finance Committee. They soon became bogged down, however, in the crosscurrents of party and regional politics, underscoring the difficulty of winning congressional endorsement of such a sweeping deficit reduction any time, let alone three weeks before an election.

Lawmakers from large Western states object to the gas tax, for example, contending that it would unfairly penalize those forced to drive long distances in sparsely populated regions of the country. Sen. Steve Symms, R-Idaho, thus introduced the amendment to strip the bill of its gas tax.

Sen. Kent Conrad, D-N.D., followed suit with the later-rejected provision designed to make the Senate's bill read more like the Democratic-drafted budget legislation adopted by the House.

The insurgency from these back-benchers exasperated Senate leaders, who spent much of the early evening attempting to pry wavering lawmakers from support of either the Symms or the Conrad measure.

"You can't pick this thing apart one item at a time," said Senate Majority Leader George J. Mitchell, D-Maine, warning that "we're going to be rightly objects of ridicule in this country" if Congress is unable to agree on a budget plan.

The bill before the Senate yesterday would pare about $250 billion from the federal deficit over the next five years, raising $142 billion in new taxes while trimming Medicare, farm supports and other benefit programs. The remaining $250 billion of promised deficit reduction would come from other legislation -- mostly cuts in the defense budget -- as well as lowered interest payments on the national debt. Altogether, these measures are supposed to trim the deficit by $40 billion in the budget year that started Oct. 1 and by an additional $460 billion through the following four years.

While the Senate plan would impose limits on deductions for people with incomes exceeding $100,000, the plan approved by the House would boost tax rates on high-income earners. The Senate would increase the 9-cent-a-gallon gasoline tax to 18.5 cents, something the House would not do. Yet the Senate would increase the earned-income tax credit for those of modest means.

"We tell the American people that there will be some sacrifice in this package," said Senate Budget Committee Chairman Jim Sasser, D-Tenn. "But we tell them at the same time that it will be fair."

House Democrats contend, however, that the Senate plan is not fair enough.

The Senate measure would increase taxes on people earning more than $200,000 by 3.7 percent, while the House would increase their taxes by twice that rate. The tax bills of those with incomes between $20,000 and $50,000 would jump by about 1 percent if the House had its way, while the Senate's plan would increase their federal payments by nearly 3 percent.

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