White House Hints at Shift on Taxes : Budget: A spokesman indicates that increases might be considered if Democratic leaders accept a presidential invitation to a fiscal summit.

The White House hinted strongly Monday that the Administration is willing to consider tax increases if congressional Democrats accept President Bush’s invitation for a budget summit.

Democratic leaders cautiously considered the President’s invitation Monday and decided to seek the views of all senators and members of the House at meetings today before responding. Bush has proposed top-level talks on a new spending and taxing blueprint for the fiscal year starting Oct. 1.

While the Democrats are expected to agree to the President’s request, they want to raise questions of procedure--such as who will be at the summit and when the bargaining will begin--before giving a formal answer later this week.

Administration apprehensions about a weakening economy and resulting reductions in tax revenues, along with a forecast of higher interest rates, have increased the importance of taking strong action to bring down the deficit.

White House Press Secretary Marlin Fitzwater said Bush agreed to have “an open debate that is unfettered with conclusions about positions taken in the past,” a clear allusion to the President’s famous “no new taxes” campaign pledge.

But senior White House officials tried to dampen speculation on the issue by saying: “Just because you’re willing to talk about everything doesn’t mean you’re going to be willing to agree to everything.”

The President’s main goal is to open up the budget discussion and explore options, these officials said.

And Fitzwater refused to be pinned down on whether Bush has reversed his position on taxes to get Democratic cooperation, adding: “We’ll try to keep a little mystery in the marriage.”

Republican congressional leaders were called to the White House today for discussion of the budget. Fitzwater said the President hoped to meet again with a bipartisan delegation by Friday.

Despite Bush’s initiative, Capitol Hill observers said they expected a lengthy political minuet before a summit is arranged and agreements can be reached.

Senate Democratic leader George J. Mitchell of Maine downplayed news accounts which pictured Bush’s meeting with congressional leaders Sunday night as a dramatic breakthrough in the months-long budget standoff.

“I recognize the desire to draw large and sweeping conclusions from such an event, but I find no basis for doing so,” Mitchell told reporters. Other Democrats--such as Sen. Jim Sasser of Tennessee, chairman of the Senate Budget Committee--have been skeptical about a summit, contending it would be used for political purposes by the White House.

“As many times as we’ve been burned, anyone who goes into this has to have a certain degree of skepticism,” a Democratic staff aide said.

At stake is the mandatory deficit reduction target for the coming fiscal year--now estimated at nearly $50 billion--and the possibility that it may be achieved by automatic spending cuts divided between defense and non-defense programs if Congress and the White House fail to reach agreement on a budget.

Sen. Pete V. Domenici (R-N.M.), the ranking GOP member of the budget panel, warned that the specter of automatic, across-the-board spending cuts--known as a sequester--would bring pressure on the lawmakers to cut a deal with the President.

“A sequester is out there and it’s ominous and it’s big,” Domenici said at a news conference. “That’s the ultimate fixer if we don’t want to do it.”

The driving force behind the White House’s desire to cut a budget deal is its fear that pressures to boost interest rates could bring the 7 1/2-year-old economic expansion to an untimely end.

“As a practical matter, reducing the deficit is probably necessary to get interest rates satisfactorily down,” White House Budget Director Richard G. Darman said in a speech last week. “And deficit reduction is clearly desirable to reduce the risk of rates moving in the wrong direction.”

But Darman also warned that the Administration, while willing to consider some types of tax increases, is not interested in raising income tax rates. “The notion that raising taxes would solve the deficit problem . . . is much too simplistic,” he said.

What the White House is looking for may not be the same thing as the Democrats in Congress, who clearly hope to extract Bush’s concession to raise the top income tax rate on the wealthy in return for any agreement to cut capital gains taxes.

Darman, however, doesn’t want to make a deal on those terms. Instead, what he is seeking is a capital gains tax cut aimed at stimulating “growth-oriented investment” and the expansion of the definition of “user fees.”

Staff writer Tom Redburn contributed to this story.