Congressional Democrats Maneuver on Budget Bill : Legislation: Conflict between House, Senate over energy taxes threatens the fragile majorities needed to pass Clinton’s deficit-cutting package.

Faced with a conflict between the House and Senate over energy taxes, congressional Democrats are groping for a way to reconcile the differences without losing precious votes from either bloc in the final showdown over President Clinton’s deficit-cutting package.

As they prepared to resume negotiations on the budget reconciliation bill Tuesday, there appeared to be significant support among negotiators for a solution that would preserve or even increase the Senate’s proposed 4.3-cent-a-gallon increase in gasoline and diesel taxes.

In the House, however, an influential group of members were trying to scuttle the gasoline tax and replace it with higher taxes on corporations and individuals.

Dropping the motor fuel levy would require substituting other measures to raise $24 billion over the next five years with no certainty this would satisfy House liberals who want to enlarge tax breaks for the working poor and for urban enterprise zones.

A source close to a senior House negotiator said the first priority would be to set a figure that would satisfy Clinton and the restive House Democrats by restoring some of the provisions in the House bill that were cut by the Senate. Once that figure was set, it would be up to the Senate to specify how to pick up the additional revenue required for this purpose.

For example, the Senate reduced the earned-income tax credit from $28 billion in the House bill to $18 billion, lowering the benefits to working families with incomes below $25,000. In addition, the Senate bill knocked out provisions for “empowerment zones” requested by Clinton and supported by the Congressional Black Caucus.

But it was clear that not all of the $5 billion in tax breaks earmarked to help develop depressed urban areas would survive in the compromise version. No one expected the full $28-billion House figure for the Earned Income Tax Credit--the program to lower taxes or provide government payments to low-income working families--to emerge from the conference, either.

Even so, the Senate negotiators were expected to accept some of these House priorities in the give-and-take of bargaining, just as representatives of the House were expected to go along with the gasoline tax despite deep misgivings among some House members.

Rep. David R. Obey (D-Wis.) and Rep. Charles W. Stenholm (D-Tex.) were pushing an alternative plan that would raise taxes on corporations and individuals who make more than $100,000 a year to offset revenues lost by dropping all energy taxes from the bill.

“There’s pretty broad support in the Democratic Caucus to do that,” said a key Democratic aide. “It would be very difficult to pass any kind of an energy tax in the House now.”

The Obey-Stenholm plan, however, has been scorned by Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, who is going to play a central role in the negotiations. Speaker Thomas S. Foley (D-Wash.) and Senate Majority Leader George J. Mitchell (D-Me.) also have said an energy tax will be part of the final package.

Senate negotiators would probably be willing to increase the gas tax by 1 or 2 cents a gallon to provide some of the additional revenue for House-backed programs that were dropped by the Senate, according to a Senate Finance Committee source.

But an aide close to the House Democratic leadership said even the existing 4.3-cent-a-gallon tax increase in the Senate bill would be an obstacle to final House passage of the budget bill if it survived in conference.

Both Senate and House negotiators agreed that the original energy tax approved by the House, based on British thermal units, could not be revived in any form even though it would have raised $72 billion over the next five years.

“Once the President walked away from the BTU tax, it died,” said the aide.

The 219-to-213 majority in the House that passed the original bill and the 50-to-49 votes in the Senate indicated to the negotiators that they cannot afford to lose any support as they produce a compromise version.

It appeared likely that the bargaining would take at least two weeks, and possibly extend to the eve of the summer recess now set to begin on Aug. 6, congressional aides said. While the dispute over energy taxes may provide the key to a compromise, other complex provisions of the massive $500-billion deficit reduction package were sure to take time to resolve.

“Those who have doubts don’t make up their mind until the last possible moment,” one aide said.

Meanwhile, Democratic National Chairman David Wilhelm announced a three-week radio advertising campaign in support of the budget reconciliation bill even before the conferees have completed work on the measure.

Wilhelm said the essential elements of the legislation--with the heaviest burden falling on the wealthiest income groups and a total of $500 billion in deficit reduction--were in both the Senate and House versions of the bill and would be in the final package.

“We’ve allowed our opponents to get a jump on us, to a certain extent,” Wilhelm acknowledged. “We have three weeks to recapture the agenda and define the terms of the debate.”