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GOP musters votes to pass tax-cut bill THE TAX-CUT VOTE


WASHINGTON -- Counting on support from a bipartisan majority, the House neared approval last night of a $189 billion package of tax cuts for families and businesses, a vote that would fulfill the final pledge of the Republicans' "Contract with America."

After a narrow GOP victory on a key procedural test earlier in the day, the House was expected to pass the measure and send it to the Senate, where it is likely to be scaled back considerably and folded into a budget package to be voted on in the fall.

"For too long, we have taken money from hard-working Americans and sent it to Washington," said House Majority Leader Dick Armey of Texas, in urging support for the measure Republicans called the "American Dream Restoration Act.

"It's time to send something back . . . starting today, relief is on the way."

But many Democrats protested that the tax package targets its benefits to the rich and would be financed either at the expense of government programs for the poor or by further increasing the budget deficit.

"It's reckless," said Rep. Sam M. Gibbons, a Florida Democrat. "It's bad policy for the American economy; it's bad policy for the American people."

President Clinton has refrained from any explicit threat to veto the legislation should it pass both the House and Senate. But he said yesterday, "We don't need to be cutting education and investment in our future to give tax relief to people who don't really need it."

Senate Majority Leader Bob Dole has promised only that he will not allow the tax cut bill to be completely sacrificed in favor of deficit reduction.

"We're going to cut taxes, we're going to look at the capital-gains area of reduction, we're going to look at tax credits [for families with children]," Mr. Dole told reporters last week.

"We're not backing away from the tax cuts."

The House bill would provide a broad array of tax breaks for families earning up to $200,000 a year and business tax incentives that are intended to boost savings and investment and create jobs.

Families would benefit chiefly from a $500-per-child credit, as well as breaks for married couples, families who care for elderly relatives and expanded use of tax-free retirement savings accounts.

Businesses would gain mostly from a 50 percent reduction of the tax rate on capital gains and increased deductions for the purchase of plants and equipment.

The vote on the tax-cut measure in the House was the Republicans' final step in the "Contract with America."

If the House approves the tax-cut measure, nine of the 10 major items the Republicans had promised to bring to a House vote in the first 100 days of Congress will have passed the House. Only a proposal to impose term limits on members of Congress went down to defeat.

In the hours leading up to the vote on the tax-cut measure, GOP leaders had to muscle and cajole many of their own members who had threatened to block the bill from coming to a vote.

"It's a little more difficult than I would expect," House Speaker Newt Gingrich told reporters yesterday after a meeting with Republican lawmakers to make a final pitch for votes.

Most of the rebellious Republicans were resisting a provision to reduce federal employee pension benefits and require larger employee contributions to the pension fund.

That provision would be used, in part, to offset the cost of tax cuts.

Reps. Robert L. Ehrlich Jr. of Baltimore County and Constance A. Morella of Montgomery County were among 11 Republican moderates who opposed the bill on the key procedural vote that passed 228-204.

Both said federal workers would wind up with a net tax increase if the House bill is enacted.

"If this is good for American families, it should be good for federal employees," said Mrs. Morella, one of the few Republicans expected to vote against the bill on final passage.

Mr. Ehrlich supports the bill, he said, because he believes strongly in the tax cuts, particularly the breaks for businesses through the reduction in capital gains. "But I'm not happy about this," he said.

House leaders presented Washington-area legislators with a written promise yesterday to reconsider the pension issue before the legislation becomes part of the final budget bill.

But Rep. Tom DeLay, the House majority whip, said yesterday there was little chance of making concessions because the federal employee pension fund is insolvent.

He said Republican leaders were determined to make the program pay for itself so the federal Treasury no longer has to make up the difference between contributions and benefits.

Savings from the federal retirement system would make up $11 billion of the total needed to offset the tax cuts, which are estimated to lose $189 billion over five years.

The legislation also calls for $100 billion in unspecified reductions that could come from social, defense or foreign aid programs.

The tax bill would also be paid for with $64 billion in cuts from welfare programs -- such as food stamps, school lunches and child nutrition programs -- that were adopted by the House two weeks ago.

In addition, the GOP leaders had to contend at the last minute with dissident Republicans who wanted to cap the income ceiling for the $500-per-child tax credits at $95,000, instead of $200,000.

The procedural vote was much closer than the Republican leaders had originally expected, because of the dissidents' fear that the party would be criticized for giving tax breaks to people who don't seem to need them at a time when the government is deeply in debt.

But the leaders refused to budge on that issue, and few Republicans defected because of it.

In final negotiations to nail down support for their bill, Republican leaders did make one concession. They agreed to link the tax cuts to enactment this year of legislation that would lead to a balanced budget by 2002.

That means Congress would have to agree on nearly $1 trillion worth of cuts over seven years, and adopt the specific reductions for this year, before the tax cuts could go into effect.

Many Democrats, recalling a history of congressional budget deals aimed at eliminating the deficit that ended in failure, dismissed that compromise as a "fig leaf." They noted that only the first year's deficit target would have to be reached in order for the tax cuts to take effect.

"The tax cuts are permanent; the spending cuts are only one year," said Rep. Benjamin L. Cardin, Baltimore Democrat. "We can always come back and change it. Don't think we won't."

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