Negotiators Agree on Deficit-Cutting Plan : Budget: The package is rushed to House for a vote. Leaders of both parties and the President’s aides back the new measure. It falls $10 billion short of earlier $500-billion goal.

Senate and House negotiators reached formal agreement Friday on a trimmed-down version of a compromise budget deficit-reduction plan and sent it to the House floor for approval only 10 days before the November elections.

At a meeting in the House Speaker’s office, after two full days of additional wrangling following months of partisan discord, congressional leaders of both parties and President Bush’s own representatives gave their blessing to the package.

The House was expected to approve the package, albeit narrowly, sometime early today, and the Senate would then vote on the accord later in the day. Bush Administration officials said there was no doubt that the President would sign the new measure.

The five-year budget plan falls $10 billion short of the $500-billion deficit-reduction goal that the two sides had set in an earlier accord, which had been worked out at a 4 1/2-month-long summit between the White House and congressional leaders.

Even so, it contained a sizable tax increase, designed to hit hardest at the rich. And it included substantial cuts in spending on agriculture and other government benefit programs.

The accord came as the Treasury Department disclosed that the federal deficit for fiscal 1990, which ended on Sept. 30, jumped to $220.39 billion, the second-worst showing ever. The record--$221.2 billion--was reported in fiscal 1986.

Economists predicted that the budget deficit for the current year, fiscal 1991, would soar to the $275-billion range, even with the deficit-reduction plan that is expected to be signed into law this weekend.

Despite the endorsement of the plan by House and Senate negotiators Friday, approval by the full House early today was not a certainty.

Speaker Thomas S. Foley (D-Wash.) predicted that the House would pass the legislation, but his top lieutenants reportedly were worried that election-conscious House Democrats might balk. Analysts figured that Democrats must provide 80% of the 217 votes needed for passage.

Most Republicans in the House--defying President Bush’s support for the plan--had indicated they would oppose any compromise that raises taxes. House Minority Leader Robert H. Michel (R-Ill.) had promised no more than 40 to 50 votes from GOP ranks to help pass the package.

In the Senate, however, leaders of both parties were more confident that the budget plan would be approved with bipartisan backing.

House Democratic leaders, fearing that further delay might erode support for the compromise agreement, rushed to bring it to the House floor late Friday night or in the wee hours today as one of the last acts before Congress quits for the year.

Negotiators gave final approval Friday to tax increases totaling $164.6 billion over the next five years and tax breaks worth $27.4 billion, mainly to “working poor” families with incomes under $20,000 a year.

There also would be $2.5 billion in tax relief for the oil industry.

Overall, revenues would contribute $137.2 billion to deficit reduction, with spending reductions of $185 billion for the defense industry and a $100-billion cutback in mandatory benefit programs.

The remainder of the $490-billion package would consist of estimated savings in interest payments on the debt, now amounting to $264.8 billion a year.

Unlike most tax packages of the last decade, the plan presented to the House would tilt sharply against those making more than $200,000 a year through a combination of rate increases, limitations on deductions and a phase-out of the $2,050 personal exemption.

People in this income category would see their taxes raised by an average 6.3%, compared to an increase of roughly 2% for those making between $20,000 and $200,000 a year and tax cuts of 2% or 3% for those below the $20,000 level.

The new budget package would raise the tax rate on the highest-income brackets to 31%, from 28% now. It would also limit itemized deductions for wealthy taxpayers, reduce the benefit from personal exemptions and impose the Medicare payroll tax on higher incomes.

As expected, the compromise contained a 5-cent gasoline tax increase, starting Dec. 1, and higher taxes on cigarettes, beer, wine, alcohol and a limited number of luxury goods, such as high-priced cars, boats, planes, jewelry and furs.

The gasoline-tax issue is particularly sensitive in California because the state already has raised its gasoline tax by 5 cents a gallon, with additional penny-a-gallon increases scheduled each January through 1994.

The compromise package contained few surprises, since most of its tax provisions were telegraphed in advance during several days of semi-public bargaining by negotiators.

It did include a tax break for parents of new babies--a tax credit of up to $340 for low-income taxpayers with children under 1 year old, effective Jan. 1.

A new child health insurance credit of 6% was added for working families with incomes under $20,000. And the existing earned-income tax credits were more than doubled, with larger credits or federal payments to families depending on the number of children they have.

The biggest single revenue-gainer, however, would come from applying the existing 1.45% health insurance tax to the first $125,000 of wages, or salaries, instead of using the $51,300 cutoff in effect this year. It would raise $26.9 billion over the next five years.

The alternative minimum tax rate would be lifted from 21% to 24%, affecting relatively few high-income people who otherwise would pay no tax at all because they have so many legal deductions.

In all, the changes in individual tax rates would raise more than $40 billion toward the deficit-cutting goal.

In a concession to investors, the tax on capital gains was set at 28%--a cut for those now in the 33% marginal rate category but merely preserving the same rate for the very rich, who now pay 28% on ordinary income.

The compromise would raise airline ticket taxes to 10% from 8% and extend the federal telephone tax for another five years.

In an effort to sweeten the package, the Senate-House negotiators decided to extend for one year a series of popular tax breaks for business, including a research and experimentation tax credit and a low-income housing credit. These provisions would lose $5.8 billion in revenue over the next half-decade.

New taxes on insurance companies, however, would raise $8 billion. A controversial plan to impose Social Security and Medicare payroll taxes on state and local public employes who do not participate in a public employee retirement system was added to the package. It would yield about $9.2 billion in revenue.

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THE INCOME TAX BITE

The following estimates of the impact of the federal budget pact include the effects of a higher basic tax rate, limitations on itemized deductions, and the phase-out of personal exemptions for upper-income taxpayers, as well as a higher wage ceiling for the Medicare payroll tax.

Individuals and families below the $75,000-level would have no net increase: . The figures do not reflect increase s in gasoline and other excise taxes. $75,000 INCOME Individuals: Before: $15,423 After: $15,508 Increase: 0.55% Married, no children: Before: $12,521 After: $12,822 Increase: 2.4% Married, two children, one earner: Before: $11,317 After: $11,618 Increase: 2.65% Married, two children, two earners: Before: $11,618 After: $11,618 Increase: 0 $100,000 INCOME Individuals: Before: $22,229 After: $22,264 Increase: 0.16% Married, no children: Before: $18,296 After: $18,959 Increase: 3.62% Married, two children, one earner: Before: $17,092 After: $17,755 Increase: 3.88% Married, two children, two earners: Before: $17,755 After: $17,755 Increase: 0 $150,000 INCOME Individuals: Before: $35,438 After: $36,146 Increase: 2.0% Married, no children: Before: $31,741 After: $32,474 Increase: 2.31% Married, two children, one earner: Before: $30,322 After: $31,141 Increase: 2.7% Married, two children, two earners: Before: $31,110 After: $31,503 Increase: 1.26% $200,000 INCOME Individuals: Before: $46,988 After: $49,665 Increase: 5.7% Married, no children: Before: $45,354 After: $46,260 Increase: 2.0% Married, two children, one earner: Before: $43,935 After: $45,460 Increase: 3.47% Married, two children, two earners: Before: $44,722 After: $46,547 Increase: 4.08% $1,000,000 INCOME Individuals: Before: $231,788 After: $261,839 Increase: 12.96% Married, no children: Before: $231,787 After: $260,854 Increase: 12.54% Married, two children, one earner: Before: $231,788 After: $260,854 Increase: 12.54% Married, two children, two earners: Before:: $232,575 After: $262,666 Increase: 12.94% Source: Deloitte, Haskins & Sells