Senate Seems Unlikely to Pass Capital Gains Cut : Budget: Lawmakers try to pare pet projects from the deficit-reduction bill as a Monday deadline nears.

As the Senate began slogging through a $14.1-billion deficit-reduction bill Thursday, both Democrats and Republicans agreed that there probably are not enough votes to include a capital gains tax cut in the measure.

But Senate Republican leader Bob Dole of Kansas said that his party would make several attempts to amend the Senate budget bill to add the capital gains tax cut supported by President Bush. If that effort fails, Dole said, Republicans will attempt to add the tax cut to other essential legislation, such as a bill on the federal debt limit.

“We’re going to offer it every chance we have,” he told reporters.

This could include using a variety of delaying tactics, such as a move to force a vote on the House bill that includes the tax break.

“Capital gains threatens to freeze us altogether,” said Senate Budget Committee Chairman Jim Sasser (D-Tenn.).

Earlier Thursday, White House officials said it was doubtful that they would insist on a showdown when the Senate votes on the deficit bill today. But they vowed to pursue Bush’s campaign pledge to reduce capital gains taxes.

At the same time, leaders of both parties were moving toward an agreement on a plan aimed at dropping more than 100 extraneous items from the deficit measure. But numerous disputes are expected over such issues as child care and dozens of special interest tax breaks.

Although the major purpose of the spending bill is to reduce the deficit in the current budget year to about $110 billion, most of its bulk is attributable to hundreds of lawmakers’ pet projects. In a brief session of the Senate Budget Committee, members complained that many of the items will actually add to the budget deficit in future years.

One feature of the bill would benefit owners of tuxedo-rental stores; others would reduce borrowing costs on rural electric loans, aid small farmers and allow wealthy families to continue taking advantage of a loophole whereby grandparents can give their grandchildren up to $2 million.

“What we’re seeing is the trashing of the budget process,” said Sen. William L. Armstrong (R-Col.).

Because lawmakers are certain to fail to complete action on the bill before a Monday deadline, the deficit-reduction law will trigger automatic, across-the-board cuts of about $16 billion in a wide variety of federal spending programs.

But Congress is expected to restore the cut funds as soon as it finishes the deficit-reduction bill.

The House has already approved a $10.9-billion deficit-reduction bill that contains a two-year capital gains tax cut. Any differences between the Senate and House versions would be ironed out in a conference committee, which is expected to be at work for several weeks.

Instead of the capital gains tax cut advocated by the Bush Administration, the Senate bill includes a plan pushed by Finance Committee Chairman Lloyd Bentsen (D-Tex.) to allow more taxpayers to take at least partial deductions for individual retirement accounts.

Republicans and a handful of Democrats have been working together on a proposal for a permanent capital gains cut of no more than 35% from current levels. They plan also to offer investors an alternative of adjusting investment profits to eliminate the effects of inflation and to provide additional tax breaks for venture capital.

During the first hours of debate on the bill, the Senate approved only one amendment, agreeing to spend an extra $40 million to aid rural hospitals.

Sasser acknowledged that the bill “does not boldly address a deficit problem” but insisted it was better than imposing automatic budget cuts and at least meets the guidelines agreed on by the White House and Congress last April.