Congress’ Tax-Cut Fever Begins to Cool : Budget: Several lawmakers, worried about the effects on the deficit, are expressing serious doubts about the idea.

Prospects for a middle-class tax cut, which once seemed headed for easy approval, have dimmed noticeably as members of Congress confront the potential impact of competing proposals on the federal budget deficit.

While a majority of lawmakers still favor a tax cut, advanced both by President Clinton and House Republicans, some in Congress are beginning to express deep misgivings.

The opposition has a long way to go before derailing a tax cut, but such sentiment could well delay enactment until 1996 and may result in a far more modest cut than previously assumed, lawmakers and congressional analysts said.

Wariness about a tax cut is especially strong in the Senate, where a small but increasingly vocal group of Democrats are firmly opposed, arguing that Congress must instead focus on cutting spending in order to reduce the deficit. Such opposition is significant because Senate rules require 60 votes to stop a filibuster.

Under the quiet prodding of first-term Sen. Russell D. Feingold (D-Wis.), seven Democrats in recent weeks have signed a “dear colleague” letter urging other senators to join in opposing a tax cut. A number of other senators who have not signed--including Republicans--have indicated sympathy with Feingold’s arguments.

“I’m not for the tax cut,” Sen. John H. Chafee (R-R.I.), a member of the Finance Committee, said in an interview. “I want spending cuts and not the tax cuts.”

Budget Committee Chairman Pete V. Domenici (R-N.M.) expressed less than all-out enthusiasm for a tax cut. “Deficit reduction comes first,” he said Wednesday. “We need to see just how much we can do in budget cuts first.”

A broad tax cut was part of the House Republican “contract with America,” which called for a capital gains tax cut and a $500-per-child tax credit for all dependent children in families with incomes up to $200,000.

But this week, House Republican leaders acknowledged that they may have to scale back the scope of a tax cut to make further progress toward balancing the budget.

The growing wariness about a tax cut is a sharp departure from the can-do atmosphere that prevailed in Washington only a few weeks ago.

In December, barely a month after the elections in which Republicans seized control of Congress, Clinton also proposed a $500-per-child tax credit, although it was limited to children under age 13 in families with annual incomes below $75,000. His plan also called for tax deductions of as much as $10,000 a year in post-high school education costs.

That touched off a bipartisan stampede toward a tax cut. Initially, Feingold was virtually alone in arguing against a tax cut, decrying such a “bidding war.”

Since then, he has persuaded seven Senate colleagues to join his effort. Signers of the “dear colleague” letter, all Democrats, are J. James Exon of Nebraska, the ranking minority member of the Senate Budget Committee; Harry Reid of Nevada, co-chairman of the Democratic Policy Committee; Paul Simon of Illinois; Charles S. Robb of Virginia; Dale Bumpers of Arkansas; Ernest F. Hollings of South Carolina and Patty Murray of Washington.

Feingold is also trying to get some of his GOP colleagues to join his drive.

Serious doubts about a tax cut surfaced with the release of Clinton’s 1996 budget on Monday, with critics in both parties chastising him for not having proposed greater deficit reduction.

The budget deficit is projected to diminish to $192.5 billion for fiscal 1995, which ends Sept. 30. That’s down from a record $290 billion deficit in fiscal 1992. But under Clinton’s fiscal 1996 budget proposal, the deficit would rise again, to $196.7 billion.

Tax-cut proponents, including the President, have said they would more than compensate for lost revenue with even greater cuts in spending. But Feingold and his allies argue that the savings from all spending cuts should be applied toward deficit reduction.

The dilemma of cutting the deficit while also enacting a tax cut has frustrated House GOP tax writers as well. As House Ways and Means Committee Chairman Bill Archer (R-Tex.) conceded at a hearing Tuesday, the magnitude of any tax cut is still up in the air, leaving the door open to the possibility that it may not be as generous as originally promised.