Congressional Support for Tax Cut Grows : Budget: Democratic leaders will push a bill favoring middle-income families. Some lawmakers fear a stampede that could drive up the deficit.

The political momentum to approve a tax cut increased significantly Tuesday as Democratic congressional leaders said they will press for immediate passage of a bill to provide relief for middle-income families--despite the objections of a key legislator.

Speaker Thomas S. Foley (D-Wash.) said that a strong majority of House Democrats is ready to vote for a tax cut targeted mainly toward average wage-earners. Foley said that he hopes to complete action on such a measure late next month, before Congress adjourns for the year.

Senate Majority Leader George J. Mitchell (D-Me.) endorsed a similar objective in response to a proposal offered Sunday by Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) to provide a $72.5-billion tax cut over five years, financed by reductions in defense spending.

But the groundswell of tax cut sentiment is drawing fire from Rep. Dan Rostenkowski (D-Ill.), the influential chairman of the House Ways and Means Committee. Rostenkowski, whose panel must originate all tax legislation, complained that President Bush and his congressional colleagues are starting a competition that might drive up the resulting revenue loss.

“I’m not against a tax cut--I’m just against it this year,” Rostenkowski said. “Why is it that the Administration and all of my colleagues get tax cut fever when we have only a few weeks left before adjournment? It’s just not timely.”

Rostenkowski recalled the 1981 rivalry between the Ronald Reagan Administration and congressional Democrats that led to enactment of the largest tax cut in history. “A bidding war can take place, and you don’t know where it will stop,” he said.

Key Democrats, however, said that Rostenkowski might be persuaded to drop his objections if he receives House leadership support for a tax bill that would offset any reductions with tax increases on upper-income Americans. He does not want to add to the record $300-billion federal deficit.

In a related development, the Ways and Means Committee approved a $5.2-billion, “self-financing” bill that would extend unemployment benefits for up to 13 weeks for an estimated 3 million workers who have exhausted the 26 weeks of payments available under existing law.

The bill is designed to avoid a second veto by President Bush, who rejected an earlier benefit-extension measure because he said it would bust a year-old budget agreement between the White House and Congress and drive up the federal deficit.

The revised measure would pay for itself over five years, mainly by raising the tax paid by employers for unemployment insurance. The levy would be increased by raising the taxable wage base for each of an employers’ workers to $7,700 from $7,000 between 1993 and 1997.

A move by Rep. Jim Moody (D-Wis.) to knock out the higher employer taxes failed on a 17-17 tie vote. Moody said that he would try again to scrap that provision if the House Rules Committee allows him to offer a challenge on the House floor.

Assuming that the unemployment benefits bill sails through the full House later this week or early next week as expected, it would open the door for potential tax-cutting amendments in the Senate that would be difficult for the House to reject.

The Constitution requires that revenue bills originate in the House. Because the jobless benefits bill deals with taxes, it could be turned into a vehicle for comprehensive tax reductions.

The lingering recession, renewed interest by President Bush in tax relief and the middle-income tax cut proposed by Bentsen all have contributed to sharply increased interest among rank-and-file House Democrats for early action on a tax cut.

“We can find time for a tax bill, I think, before we leave, and that’s what I’m hoping we will be able to do,” Foley told reporters. “Providing relief to middle-income taxpayers can help stimulate the economy. Many of the problems today are that people who are in this income area who want to buy houses don’t have the down payment, who want to buy automobiles can’t see themselves making the monthly payment. . . . That’s what’s drying up demand around the country.”

Majority Whip David E. Bonior (D-Mich.) said that he expects any tax legislation approved by the House to benefit families with incomes of as much as $100,000 a year, while raising taxes on the wealthiest 1% to 2% of all Americans to offset the revenue loss.

California Rep. Vic Fazio (D-West Sacramento), vice chairman of the House Democratic Caucus, said that the length of the recession has shocked the Administration as well as Congress and that the absence of a solid recovery has mobilized support for a tax cut.

Another Californian, Rep. Leon E. Panetta (D-Carmel Valley), chairman of the House Budget Committee, cautioned against a congressional game of “Can you top this?” as Republicans and Democrats vie to offer ever-larger tax reductions.

“In dealing with the fundamental weakness in the economy, we want to be careful to avoid a quick fix,” Panetta said. “Any tax relief would not take effect until the middle of next year, so we must be very certain it’s paid for (by offsetting tax increases.)”