Foley Backs Tax Breaks for ‘Working Poor,’ Boost in Corporate Rates : Deficit: Speaker voices concern for full-time workers who still fall below poverty line. He would raise big business’ tax from 35% to 36%.

House Speaker Thomas S. Foley (D-Wash.) signaled interest Saturday in expanding tax breaks for “working poor” families and increasing investments in distressed urban areas as part of a final Senate-House compromise on President Clinton’s deficit-reduction package.

Foley also hinted that he would favor a bigger increase in the corporate income tax rate--to 36% instead of the 35% levy now included in both the Senate and House bills--in order to offset the cost of the two programs.

The Speaker also said he would work to ensure that bigger tax breaks for workers who have full-time jobs but remain below the government’s poverty line would be included in a Senate-House agreement.

In its version of the budget bill, the House expanded the earned-income tax credit for working poor families by $28 billion over five years, but the Senate pared the increase to $18 billion, triggering protests from liberal Democrats.

Similarly, the House approved a $5-billion tax break for business firms locating in some deteriorating big-city neighborhoods, while the Senate dropped that provision from its version of the bill. Leaders of the Congressional Black Caucus want the funds restored.

But some moderate Senate Democrats, including Oklahoma’s David L. Boren, have said they may not vote for the final deficit reduction bill unless it contains more spending cuts than tax increases.

A version of Clinton’s plan squeaked through the Senate early Friday because of a tie-breaking vote by Vice President Al Gore. Negotiators will be named shortly to resolve key differences between the House and Senate measures.

One major gap involves the House-approved energy tax, which would raise $72 billion over five years, and a $24-billion Senate provision to raise the gasoline and truck fuel tax by 4.3 cents a gallon.

“I’m satisfied the conferees will find a consensus,” Foley said Saturday on CNN’s “Evans & Novak.”

He also said it would be possible for the negotiators to go beyond the scope of provisions in the Senate and House versions to forge a compromise that would be ratified by the two chambers before Congress leaves in early August for a monthlong recess.

In his weekly radio address Saturday, Clinton forecast rugged bargaining ahead in getting final passage of the combination of tax increases and spending cuts that has provoked sharp Republican attacks, as well as defections by some moderate Democrats.

“The negotiations will be difficult, but I’m going to work hard to keep the essential characteristics of the economic plan that I believe in so deeply,” Clinton said.

The final version should cut the deficit by $500 billion below where it otherwise would be in 1998, make spending cuts at least as big as tax increases and put three-fourths of the burden of tax increases on the 6% of Americans with the highest incomes, he said.

“We absolutely must put all the net savings from cuts and taxes in a deficit trust fund so the government can’t touch it over the next five years,” Clinton added.

Replying to Clinton on behalf of the Republican Party, Sen. Bob Packwood of Oregon said the concept of a deficit trust fund was theoretically good, but that in practice the government spends all the money it raises through taxes.

“Until we reduce spending first, let’s not assume we’re going to reduce the deficit by increasing taxes,” Packwood said. “This bill is a tax bill . . . not a deficit-reduction bill. It should be defeated.”