House OKs Democrat Tax Hike Plan

The House, amid confusion on the floor at the end of a chaotic day, reversed itself Thursday night to approve by a single vote a Democratic budget plan that includes $12 billion in new taxes.

The measure, put aside earlier in the day, appeared to be defeated again, 206 to 205, as House Speaker Jim Wright (D-Tex.) declared that time for voting had elapsed. But Wright then permitted freshman Rep. Jim Chapman (D-Tex.) to change his vote, winning passage of the bill and sending the House into uproar.

Republicans shouted for a “parliamentary inquiry” while Democrats cheered, relieved at salvaging what had appeared to be a brutal rebuff to Wright, who had spent most of the day pressuring rebellious Democrats to change their votes.

41 Democrats Opposed

Forty-one Democrats still opposed the final bill, seemingly reluctant to vote for tax hikes while negotiators from Congress and the Administration sought to win agreement on a bipartisan deficit-reduction plan.

“Any revenue measure has an uphill climb,” said a relieved Wright moments after the vote.

Before the vote change, Wright had left the Speaker’s chair to say a few words to Chapman, who then reversed his course and switched his vote.

The House leadership did not win its narrow victory until it had stripped from the bill a controversial measure overhauling the welfare system and pressured wavering members to back the party line.

Effort to Table Bill

Republicans--backed early in the day by many conservative Democrats--had sought to table the tax bill until the budget negotiators could reach agreement on a compromise. But their alternative calling for a spending freeze failed, 229 to 182.

The budget negotiators made scant progress on Thursday, continuing to argue over spending cuts pushed by the White House but considered too drastic by congressional Democrats. Congressional negotiators voiced optimism, however, that talks soon could turn to more substantive matters.

“The shape of the table is all decided, the scorekeeping is done,” said House Budget Committee Chairman William H. Gray III (D-Pa.). “Tomorrow we can get down to the heavy lifting.”

The bill passed by the House would put most of the new tax burden on corporations and wealthy individuals through a tightening of the estate and gift taxes and limiting interest deductions to home mortgages of $1 million. It also would extend for three years the 3% excise tax on telephones that was scheduled to expire this year. The bill would discourage corporate takeovers by reducing the tax benefits for funds borrowed to finance an acquisition.

Reducing the Deficit

The $12 billion in taxes approved by the House would provide the major share of a $23-billion package to help reduce the deficit during fiscal 1988, which began Oct. 1. Spending cuts will be handled in a separate bill.

President Reagan has repeatedly threatened to veto any legislation containing tax hikes but last week’s stock market crash prompted a dramatic reversal in the President’s position. He is now saying he will consider certain tax increases, although he wants them kept below the level that congressional Democrats would like.

The budget negotiators, 14 members of Congress and three key Administration officials who have met through the week in a room just outside the Senate chamber, are striving to prepare a combination of taxes and spending curbs that could yield a deficit reduction greater than $23 billion. The goal is to assure nervous investors that the government is serious about cutting the budget deficit.

The negotiators still have not discussed the issue of taxes and the White House has argued that spending reductions should comprise most of the deficit package.

‘We’re Making Headway’

“We’re making a little headway,” said Sen. Pete V. Domenici (R-N.M.), adding that the negotiators are “moving beyond discretionary” spending in discussions about spending cuts. Domenici said he was discouraged by slow progress early in the day, “but I’m not now. I think we’re back on the path.”

One key participant, Rep. Jamie L. Whitten (D-Miss.) expressed doubt about reports of a rapid settlement. “I’ve read in the papers about the progress we’d made. I haven’t seen it,” he said.

President Reagan met with his budget negotiators and other White House officials Thursday morning. “It sounds like you’re talking about the right issues,” Reagan was saying as reporters and photographers entered at the start of a photo session.

Asked what those issues were, Treasury Secretary James A. Baker III said: “Getting some spending cuts.” White House spokesman Marlin Fitzwater told reporters that the negotiations are “likely to go into next week.”

Balanced-Budget Law

The $23-billion target for deficit reduction is required by the Gramm-Rudman law, which mandates a balanced budget by 1993. If the President and Congress cannot agree on a plan by Nov. 20, automatic spending cuts will be put into effect, hitting hard at both military and domestic programs.

Administration officials and members of Congress are eager to reach a budget compromise to demonstrate leadership and send a message of reassurance to troubled financial markets.

For a time earlier Thursday it appeared that Republicans and rebellious Democrats would succeed in forestalling House action on the $12-billion tax bill.

“Let’s give the budget summit a chance to work,” urged one Democratic rebel, Rep. Charles W. Stenholm (D-Tex.), in a letter to colleagues. If the negotiators reach an agreement, congressional approval and “presidential signature will be swift and certain,” he said.

Stenholm and other Democrats combined with Republicans in the first vote Thursday morning on the measure. The vote, 217 to 203, rejected the rules for debating the bill, dealing a stunning blow to Speaker Wright and Majority Leader Thomas S. Foley (D-Wash.). The Republicans were joined by 48 Democrats.

“What has been said here, Mr. Speaker, is there ought not be a quick rush to judgment,” House Republican leader Robert H. Michel (R-Ill.), said after the vote.

To put the amended plan to a second vote, the Democratic leadership arranged for a formal adjournment of the House and the beginning of a “new” legislative day at 3 p.m., complete with a new morning prayer.

The Senate has not yet completed work on its version of the tax plan.