Accord on Deficit Near; Gas Tax Is Still Unresolved

Senate and House negotiators reached agreement over most outstanding elements of President Clinton’s economic plan Thursday and are expected to finish work on the compromise measure today--though they remain divided over the size of an increase in the federal gasoline tax.

House and Senate conferees agreed on new tax breaks for low-income families, aid to help rejuvenate troubled urban areas and several provisions to help California. But they remained as much as several cents apart on the per gallon increase in the gasoline tax and had yet to resolve differences on several other items.

As the two chambers narrowed their differences, leaders began shifting emphasis to the difficult task of winning approval for the compromise in both chambers. Sen. Daniel Patrick Moynihan (D-N.Y.), chairman of the Senate Finance Committee, conferred by telephone with Clinton about the outlook for passage of the bill that is designed to reduce the deficit by $500 billion over the next five years.

“They both have a pretty good understanding of how to get this done,” reported Lawrence O’Donnell, staff director for the Senate panel.

Negotiations over increases in the existing 14.1-cent-a-gallon federal gasoline tax have narrowed the gap between the 9-cent increase favored by the House and the 4.3-cent increase approved in the Senate version of the bill.

Rep. Dan Rostenkowski (D-Ill.), the chief House negotiator, pressed for a 7-cent increase so that “we have a little more wiggle room” to finance social spending demanded by liberals and business incentives favored by moderates.

But a bloc of Senate Democrats killed a proposal to raise the tax by 6.5 cents. The senators apparently fear a political backlash from voters, although the difference between increases of 4.3 cents and 6.5 cents would amount to less than $8 a year for the average driver, based on 12,000 miles of travel.

“We are trying to find a figure that works,” said a Senate aide.

Despite that lingering disagreement and unresolved differences over various small business investment incentives, Senate and House aides said that they expect negotiators to conclude an agreement today.

“It’s a juggling act but they are moving toward closure,” said a senior aide to the House Democratic leadership.

Tentative agreements were reached Thursday to adjust the earned-income tax credit that helps ease the tax burden on the poor. Negotiators signaled their intention to allocate $21 billion worth of tax breaks to poor families, $3 billion more than the Senate approved but $7 billion below the House figure.

Similarly, the conferees agreed to establish 10 empowerment zones in major urban areas, almost certainly including Los Angeles, and to allocate at least $1 billion for their operation. Businesses would be given federal incentives to locate in the zones and hire local workers.

In a compromise important to California, the Senate-House negotiators also agreed to extend business tax credits for research and development for 30 months, starting in mid-1992 and going through 1994. The extension was actively pushed by Sen. Dianne Feinstein (D-Calif.).

Sen. Barbara Boxer (D-Calif.) said that the conferees had agreed to several other measures that she has advocated, including a tax credit for businesses that hire disadvantaged inner-city youth that would be extended through 1994 and permanent extensions of tax credits for low-income housing and mortgage revenue bonds.

“We have done really well for California,” she said. “They’re moving in our direction.”

Even without an accord on major tax issues, however, Administration officials worked Capitol Hill to sell the unfinished legislation to doubtful Democrats who must carry the entire burden in view of solid Republican opposition in both the Senate and House.

While several Democratic senators who voted for the original Senate bill are now balking at the outlines of the compromise measure, other lawmakers who once expressed doubts expressed satisfaction over the conferees’ work.

But vote counters in both bodies acknowledged that they lacked enough solid support Thursday to be confident of victory.

“It’s better in the House than in the Senate but it’s still tight in the House,” said Leon E. Panetta, director of the White House Office of Management and Budget.

Panetta said that four or five Democrats who voted for the Senate bill now are having doubts about the emerging Senate-House compromise--a worrisome matter since the Senate only passed that legislation by a 50-49 vote, with Vice President Al Gore casting a rare tie-breaking vote.

Sen. Kent Conrad (D-N.D.), however, said that senators are beginning to realize that they face a choice between accepting a compromise bill or failing to take major action to reduce the record-high federal deficit.

Six Democrats voted against the Senate bill and Administration officials were trying to woo some of them to support the compromise bill. Sen. Richard H. Bryan (D-Nev.), for example, indicated that he might go along with the President if the gas tax is low enough and the conferees allow a larger deduction for business meals and entertainment than the 50% figure in both the Senate and House measures.

Senate-House negotiators reportedly were discussing making 65% of these costs deductible as business expenses--a change that is sure to please Bryan, who represents Las Vegas with its concentration of hotels catering to business conventions. The current level is 80%.

Gas Tax Cost

Negotiations over a plan to reduce the federal deficit bogged down on raising federal gas taxes. Here is how the Heritage Foundation, a conservative group that opposes the increase, calculates the cost to an average driver: Increase: Added cost per year 6 cents: $41.00 6.5 cents: $44.42 7 cents: $47.84 Source: Heritage Foundation, based on Federal Highway Administration data