House set to link deficit reduction to cutting taxes


WASHINGTON -- House Republican leaders agreed to a major concession yesterday that will make their tax-cut package dependent on sweeping spending reductions aimed at balancing the budget by 2002, GOP sources said yesterday.

Under the agreement, reached in talks with GOP moderates, tax cuts could not take effect until Congress passes a blueprint for making up to $1 trillion worth of spending cuts over the next seven years.

Congress also would have to enact the first year's spending reductions -- amounting to tens of billions of dollars -- before taxes would be cut.

This agreement, in effect, requires Congress to adopt an ambitious deficit-reduction program that the Republican leaders have promised all along.

If Congress goes along with the GOP plan, the tax cuts would take effect next year.

The accord is expected to resolve the objections of nearly two dozen Republican moderates who threatened to vote against the $189 billion tax-cut package when it reaches the House floor next week. The moderates had sought some guarantee that the spending cuts would be made.

The deal may also make the legislation more attractive to about 30 conservative Democrats who also sought to link the tax cuts )) to deficit reduction.

"We are very pleased with this agreement," said Kristin Nolt, a spokeswoman for Rep. Michael N. Castle, the Delaware Republican who led the negotiations for the Republican moderates. "This is a tremendous step forward."

Final details of the agreement are still being discussed. A formal announcement is expected Monday or Tuesday. But spokesmen for Republican leaders, as well as for the moderates, said the basic outlines of the plan are clear.

"The remaining differences are very minor," said Ed Gillespie, press secretary for House Majority Leader Dick Armey, the Texas Republican.

GOP leaders believe that the concession to the moderates is enough to secure House passage of the last item in the Republican "Contract with America," and one of the most divisive proposals.

The tax-cut package promises an array of reductions, including a $500-per-child tax credit for families who earn up to $200,000 a year and a 25 percent reduction in the capital gains tax.

Many lawmakers in both parties have complained that the proposal is too expensive for a government that is nearly $5 trillion in debt.

House Democrats, who contend that the Republican plan is aimed mostly at the rich, will offer a much smaller substitute tax-cut package when the bill comes up for a vote Wednesday.

Mr. Castle and his centrist group are worried about the Republicans' ability to balance the budget, because spending cuts have proved difficult to approve.

The House last month became embroiled in an emotional battle over $17 billion in spending cuts from this year's budget, a package that has since been scaled back in the Senate.

Republican senators have declared that the tax package will also be shrunk considerably once it reaches the Senate.

But the House Republicans are approaching the end of their 100-day rush to fulfill the promises in their "Contract with America," and have given top priority to passing the tax package intact.

The steam seems to have gone out of a drive by a group of 102 House Republicans who urged House Speaker Newt Gingrich last week to lower the income ceiling for families who would be eligible for the child tax credits.

"You get tired of banging your head against the wall," said Lisa Gagnon, a spokeswoman for Rep. Pat Roberts of Kansas, the leader of the larger group, who has made no headway in his approaches to the Republican leadership.

Mr. Roberts argued that the income ceiling should be dropped because of the danger that the cuts could swell the deficit, as well as the negative symbolism of granting so-called "middle-class" tax cuts to families making $200,000 a year.

Mr. Gingrich and other leaders maintain, however, that lowering the income ceiling won't stop Democrats from charging that Republicans are trying to do favors for the rich. And by reducing benefits aimed at families, the Republicans would also risk alienating the family advocacy groups that were promised that tax relief would be in the bill.

Mr. Castle and some other moderates have not yet given up on another provision they want to add to the tax bill.

That provision would repeal the tax cuts if Congress fails to reduce the deficit in the ensuing six years after the first year's spending cuts.

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