Deadline Missed but Budget Talks Go On : Deficit: Democrats are preparing a new proposal. The disagreements on taxes, domestic spending and defense are still wide.

Despite failure to reach a budget agreement by their self-imposed Monday deadline, negotiators continued to labor in search of a compromise to reduce the federal deficit and avoid harsh automatic spending cuts scheduled to go into effect Oct. 1.

Democrats prepared to offer a new proposal Monday night that Republican officials said they hoped would contain significant concessions designed to narrow the wide gap between the two sides on taxes, domestic spending and defense.

“It’s a slow process,” conceded House Speaker Thomas S. Foley (D-Wash.), “but I’m confident we’ll get an agreement . . . . Obviously, there was a hope we would make more (progress) by this time, but we’re going to continue.”

Late Monday, a spokesman for House Majority Leader Richard A. Gephardt (D-Mo.) announced to reporters covering the closed negotiations that there would be no additional briefings and urged reporters to leave Andrews.

In a long weekend of talks, Democrats and Republicans exchanged three offers on ways to cut the deficit for fiscal 1991 by roughly $50 billion and save $500 billion over the next five years, aides said, but the plans changed little from the original proposals presented on Friday.

“I would say the talks are going nowhere fast,” Treasury Secretary Nicholas F. Brady complained in an early morning television interview Monday.

Republicans argued that Democrats were not serious about closing the budget gap in their early proposals because they relied largely on higher taxes and Pentagon cuts even as they planned to increase domestic program spending by about $86 billion over the next five years.

Democrats countered that Republicans want to provide lucrative benefits for the wealthy by lowering the capital gains rate on investment profits to 15% but that they are unwilling to tie such a move to a hike in income taxes for the rich.

“Republicans want capital gains regardless of the windfall,” said one Democratic aide, and “they clearly want to sock it to Medicare beneficiaries, civil service and military retirees.”

In the opening rounds, Democrats proposed raising the top income tax rate to 35% from 28% for the wealthiest taxpayers, imposing a 10% tax on luxury goods, higher taxes on alcoholic beverages and a small broad-based energy tax combined with a 7-cents-a-gallon increase in gasoline taxes. Also, they proposed an oil import fee to go into effect only when oil prices drop below $20 a barrel.

The plan includes a revenue-losing proposal to allow people to withdraw funds from their individual retirement accounts for such purposes as college education or buying a first home.

The total package, including about $9 billion expected from beefing up efforts to collect bad debts, would increase revenues by about $215 billion over the next five years, aides said.

Republicans, by contrast, oppose any change in income tax rates and propose cutting capital gains taxes in expectation of a tax revenue windfall from greater turnover of investments. They suggested that most revenues should come from higher beer and wine taxes and from a $10,000 limit on the amount of state and local taxes that may be deducted on federal tax returns. Their plan would lose revenue by providing tax breaks to promote economic development in so-called enterprise zones and also by expanding IRAs.

The Republican package, a GOP official said, would increase tax revenues by $99 billion over the next five years.

Republicans are willing to consider higher energy taxes, GOP aides said, and may support a more modest hike in luxury taxes than Democrats favor.

Both sides shied away from any proposal to raise cigarette taxes, however, out of fear of tangling with tobacco-state lawmakers.

“The official reason is that Bush has promised the governor of North Carolina that he would not tax tobacco,” said one leading Democrat, “but the real reason is that (Sens.) Jesse Helms in North Carolina and Mitch McConnell in Kentucky hold two Republican seats (that are) in jeopardy.”

On spending, Democrats divided their plan into two parts, proposing certain cuts in domestic spending and benefit programs but suggesting higher spending in other areas to promote greater “equity.”

The net result, one Republican aide complained, would be a $40-billion increase in domestic spending over the next five years compared with the Democrats’ latest plan to slash Pentagon spending by at least $245 billion over the same period. The GOP wants to limit military cuts to $120 billion over the same period.

“The Republicans asked the Democrats to come up with $120 billion more (in domestic spending and benefit cuts) to get to a net (five-year) reduction of $80 billion that they believe is necessary,” one source said.

Democrats defended their plan to increase some domestic programs by pointing to Bush Administration proposals to spend more on space, science, criminal justice and foreign affairs.

Given the still-wide gulf between the two sides, several officials suggested that the talks are likely to return to Capitol Hill perhaps as early as today, where they might drag on even past the Oct. 1 date when Gramm-Rudman is supposed to trigger automatic spending cuts of more than $100 billion.