Uncertainty over whether President Bush will accept a higher income tax rate for the wealthiest Americans in exchange for cutting capital gains taxes threw congressional tax writers into confusion yesterday, seriously diminishing prospects for a quick solution to the months-long fiscal impasse.
The House Ways and Means Committee approved a stripped-down, five-year $145 billion tax package that puts off fights over higher income tax rates, capital gains tax cuts and tax breaks for other investments.
Administration officials, meanwhile, spent much of yesterday shuttling across the Capitol, meeting with anxious House and Senate Republicans in an attempt to calm them and clarify the president's position. Bush set off the controversy Tuesday by first publicly suggesting his willingness to accept a capital gains cut-income tax rate exchange and then giving a group of protesting GOP senators the impression he was backing off that position.
Campaigning for Republican candidates in three southern states yesterday, the president steadfastly refused to clear up the confusion. Asked in St. Petersburg, Fla., if he would clarify his position on the tax issue, Bush said, "Let Congress clear it up."
White House press secretary Marlin Fitzwater made an effort to put a lid on the controversy, refusing to clarify Bush's remarks, explain them or withdraw them. By early last night, after being pressed a half-dozen times on Bush's current position, Fitzwater said, "I want to bob and weave on this today."
Asked why, he said, "Because we want Congress to come up with a package. We don't want to signal on any specific provision."
The disarray in the administration and on Capitol Hill makes it increasingly unlikely that lawmakers will be able to meet their self-imposed deadline of Oct. 19 to settle details of tax increases and spending cuts to meet the budget resolution's goal of saving $500 billion over five years, $40.1 billion of it in the fiscal year that began Oct. 1.
"It's not impossible," said House Budget Committee Chairman Leon E. Panetta (D-Calif.). "But it will take a hell of a lot of cooperation."
Bush has said he will not sign legislation that would continue to fund the government on a short-term basis beyond Oct. 19 unless lawmakers have fully implemented the deficit-cutting deal by then. In Atlanta yesterday, Bush said, "The clock is running and it's going to keep on running and I'll veto it again if we don't get a satisfactory deal."
The president had appeared to clear the way to a quick agreement Tuesday by saying he would be willing to give up one 1988 campaign promise, not to raise income tax rates, in order to win another, cutting capital gains taxes. House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) and Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) each planned to propose both higher income taxes on the rich and lower capital gains taxes, which in general benefit the rich.
After a White House meeting with Bush early yesterday morning, Rostenkowski devised a strategy of approving a bare-bones package of tax increases and benefit program savings and then fighting out such issues as higher taxes on the rich, lower taxes on capital gains and Medicare savings on the House floor, according to committee aides. One Democrat on the committee called the scheme "punting on first down."
Meanwhile, the Senate Finance Committee twice postponed and then canceled a meeting yesterday. "I had the deal all worked out until the president changed his position," Bentsen said. Panel Democrats met into last night trying to figure out how to proceed.
Bentsen said he will meet with the full committee today to outline his plans. "We've got good options," he said. Asked if a capital gains tax cut and income tax rate hike for the rich would be among them, he said, "That'll be one of the options."
Democrats seized on the confusion in an attempt to blame Republicans for what could be an extension of the already protracted budget deadlock. "We Democrats are still trying to negotiate, but we don't know who to negotiate with," said Sen. Wyche Fowler Jr. (D-Ga.). "Until the president pulls his party together and speaks with one voice, it's very, very hard to do what we must do for the sake of the country."
Republicans, meanwhile, sought to turn the tables on the Democrats, who have argued that tax rates for the wealthiest would have to be increased to offset the benefit of a capital gains tax cut. "Some Democrats are now trying to force us to take capital gains in order to get more money by raising tax rates," said Senate Minority Leader Robert J. Dole (R-Kan.).
Treasury Secretary Nicholas F. Brady and Office of Management and Budget Director Richard G. Darman met with House and Senate Republicans in the Capitol. Sources said some House Republicans feel the administration has not given them adequate attention throughout this process. Rep. Mickey Edwards (Okla.), chairman of the House Republican Policy Committee, arrived at the meeting room just as Darman did. Edwards put out his hand and said, "Hi, I'm Mickey Edwards. Pleased to meet you."
House Republicans are expected to meet today with Bush at the White House.
The package the House Ways and Means Committee approved by voice vote after meeting behind closed doors for nearly five hours closely follows the tax and benefit program provisions of the failed budget summit agreement.
It would drop all the tax breaks, including the contentious package of breaks for investments in new small companies, that were contained in the original and rejected budget plan. The new plan also would raise federal taxes on gasoline from 9 cents a gallon to 20 cents a gallon, rather than 21 cents a gallon as envisioned in the budget agreement. It would exempt home heating oil from the proposed 2-cents-a-gallon tax on refined petroleum products.
After heavy lobbying by the trucking industry, the plan also would apply a 9-cents-a-gallon fuel tax to railroads, the first time that industry has been covered by such a tax.
Rostenkowski also restored the provision of the original agreement that would apply a 10 percent tax to the amount that the purchase price of new private aircraft exceeds $100,000. The item had been deleted by Dole, whose state includes the headquarters of Beech Aircraft Corp. and Cessna Aircraft Co.
In Medicare, the measure would save $50 billion over five years, compared with the budget summit's $60 billion saving. Premiums that beneficiaries pay for the voluntary coverage of physician and outpatient hospital services would go up. The amount that beneficiaries must pay themselves before receiving benefits under that program would go from $100 to $125, rather than $150 as set out in the budget summit plan.
A Democratic alternative to be offered on the House floor would probably spare Medicare as much as $10 billion in cuts and alter tax provisions toward the goal of more equitably spreading the pain of deficit reduction. House Republicans were meeting last night to discuss the shape of a GOP alternative plan that also may be offered on the floor.
Staff writers Ann Devroy, traveling with Bush, and Don Phillips contributed to this report.