The House, racing to avert another government shutdown, last night approved a deficit-reduction package crafted by Democrats that would significantly raise income taxes on the wealthy and provide tax breaks for the poor and middle class.

Closely following party lines on final passage, lawmakers voted 227 to 203 to approve narrowly the largest package of tax increases and benefits program cuts ever proposed.

Earlier, the House split 238 to 192 on a key vote to modify the measure by including the Democratic tax alternative. Only 10 Republicans -- all northern moderates -- voted for the plan, and only 28 Democrats voted against the amendment. They were largely southern conservatives or involved in hotly contested election races.

The votes followed an angry and partisan daylong debate that was colored by the failure of House Republicans to produce an alternate plan that would meet the deficit-reduction targets set by President Bush and that were included in the budget resolution Congress approved last week.

The House action sets the stage for an election-eve collision with a bipartisan deficit-cutting plan, now pending in the Senate, that would not affect income tax rates. The Senate is scheduled to begin debate on the plan today.

"The Democrats pushed through a tax increase on working men and women," Bush said in a statement from the White House after returning from a campaign trip late last night. He repeated his threat not to sign a stopgap spending bill to extend the government's funding beyond 12:01 a.m. Saturday if the House and Senate versions of the deficit-reduction legislation have not been reconciled by then into an acceptable compromise.

"We are at the present time in crisis -- a crisis in government, a crisis in the economy and a crisis in confidence," House Budget Committee Chairman Leon E. Panetta (D-Calif.) said during yesterday's often-bitter debate.

The House package would generate $175.4 billion in new tax revenue over five years, much of it through provisions Bush has said he would not accept. It also includes $26.8 billion in tax breaks over the period for the working poor and a capital gains tax cut for those earning less than $150,000 a year.

Nearly $100 billion in additional deficit reduction over five years would come from higher federal fees and cuts in benefits programs, including $43.2 billion from Medicare.

"What {we're doing} today is getting our house in order, putting ourselves in a position where we can invest in the future rather than fighting over how to pay for the past," said House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), a prime architect of the Democratic plan. "Tonight, equity and fairness make a comeback."

GOP lawmakers pointed to the package as evidence that Democrats are big spenders and big taxers. "It is a textbook example of Democratic economic theory: Forget spending restraints, just say 'yes' to taxes," said Rep. Bill Archer (Tex.), the Ways and Means Committee's ranking Republican.

The House GOP failure to come up with an alternate plan that met the deficit-reduction target of $500 billion over five years, at least $40 billion of it in the fiscal year that began Oct. 1, was particularly embarrassing to Republicans given their disarray on this issue.

In May, House Republicans did not offer Bush's original budget for a floor vote, fearing that it would not win a majority of even GOP lawmakers. Earlier this month, continuing confusion and internal bickering kept House GOP leaders from participating in the negotiations that produced the overall spending plan that Congress finally approved.

This week House Republicans, deeply split over what taxes to include, came up with a plan that fell well short of the deficit-reduction targets. Because the proposal missed those goals, House Democratic leaders would not allow it to be offered during yesterday's debate.

"Their plan doesn't meet the standards that everybody agreed should be met," said House Speaker Thomas S. Foley (D-Wash.). "It simply doesn't approach the problem and do the job."

Joined by only a handful of Democrats, mostly southern conservatives, Republicans failed in three parliamentary attempts to force a vote on their plan.

"For five months the Democrats begged us to offer a budget," said House Minority Whip Newt Gingrich (R-Ga.). "Today, we offered one, and the Democrats promptly ruled it out of order."

"This is a shameful day in the history of the House, and I'm embarrassed," said Rep. Bill Frenzel (Minn.), the House Budget Committee's ranking Republican.

But the Democrats pounded away at the Republican failure to produce a plan that would meet the deficit-reduction targets. Rep. Thomas J. Downey (D-N.Y.) called it the "too-little, too-late deficit-reduction plan." Turning to the Republican side of the chamber, he said, "Face it, guys: You can't cut it, and you can't cut it enough."

"When it's time to put up, they come up with a mouse," Panetta thundered. Pointing to GOP lawmakers, the one-time Republican added: "Someday, my hope is the minority in this body will work with us to help govern this nation, not bring it down."

While Democrats stressed that the taxes in their package are targeted at the rich, Republicans focused on one element that would effectively raise taxes almost across-the-board.

In order to make up for revenue lost when rural and suburban lawmakers won the elimination of a plan to raise the 9-cents-a-gallon federal gasoline tax to 12 cents, the Democratic drafters included a provision that would delay for one year inflation adjustments to tax brackets and personal exemptions.

The item would increase income taxes on all but the richest Americans. Even the poorest taxpayers would have bigger tax bills as their income rises with inflation. For all taxpayers, higher income tax rates would kick in sooner.

Only the richest Americans, who have already had their deductions phased out under current law and who already pay the maximum average rate of 28 percent, would notice little effect from the indexation delay.

"They raise rates," Archer said of the Democrats. "Not just on the rich, but on all families."

"It is fair -- it hits everybody," said Rep. Mickey Edwards (R-Okla.). "It hits the rich, it hits the poor, it hits the middle income."

Democrats said the item is just one part of a package that is much more progressive overall and that the Republicans were distorting the package by picking out one component.

"It's fairer and better than the gasoline tax," said House Majority Leader Richard A. Gephardt (D-Mo.). "You have to look at the totality of the package."

Emil Sunley, director of tax analysis at the accounting firm Deloitte Touche, said "a gasoline tax is obviously much more regressive than delaying indexing."

The House measure would also raise top income tax rates for the wealthiest Americans from 28 percent to 33 percent and impose a 10 percent surtax on those with yearly taxable incomes higher than $1 million. The legislation would benefit the working poor by expanding the earned-income tax credit by $11 billion over five years.

In addition, it would allow individuals $100,000 in tax-free capital gains, not including the sale of securities or collectibles, over a lifetime. Individuals with annual taxable incomes below $100,000 could take tax-free capital gains of $1,000 yearly, including the sale of securities. The exclusion would be phased out for those earning between $100,000 and $150,000.

The Senate bill, devised by Senate leaders and administration officials, would change neither income tax rates nor capital gains taxes. It would limit the benefit of itemized deductions claimed by taxpayers earning more than $100,000 a year. More than one-third of its new revenue would come from higher excise taxes on gasoline, cigarettes and alcoholic beverages, which Democrats contend hit the middle class harder than the rich.

Yesterday, Sens. David L. Boren (D-Okla.) and Sam Nunn (D-Ga.) revived an earlier proposal to raise the income tax rate for the wealthiest Americans in exchange for cutting capital gains taxes. They would raise the rate paid by the richest taxpayers to 33 percent while reducing levies on profits from sale of property, stocks and other similar assets to as little as 15 percent.

Staff writers Helen Dewar, Steven Mufson and Don Phillips contributed to this report.

Jan. 29, 1990: President Bush sends Congress a $1.2 trillion budget for fiscal 1991 that would reduce the federal deficit by $37 billion. The president's proposal calls for $13.9 billion in new revenues and federal fees, which the administration does not count as taxes.

March 11: Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, proposes a plan to reduce the deficit by $55 billion through increased taxes and curbs on growth in federal spending -- including Social Security benefits.

April 15: The deadline for final congressional action on a budget package passes.

May 1: The House passes a $1.2 trillion spending plan offered by Democrats as "a first step in the process." No Republicans vote for the plan, which claims to cut the deficit by $35.5 billion.

May 2: The Senate approves a $1.2 trillion spending plan that claims to reduce the deficit by $43 billion. The plan incorporates steeper cuts in defense and domestic programs than the House or administration proposed.

May 9: The president and congressional leaders agree to begin budget negotiations May 15 "without preconditions."

May 15 and 17: Congressional and administration officials meet, but disagree on the size of the deficit.

June 18: As the budget summit proceeds on and off with little visible progress, Office of Management and Budget Director Richard G. Darman calls for an accord before the July 4 congressional recess. House and Senate leaders scoff at this deadline.

June 26: Bush breaks his campaign vow not to raise taxes and issues a statement that the deficit now requires "tax revenue increases."

July 10-11: Budget negotiators meet again. Senate Majority Leader George J. Mitchell (D-Maine) says he will not accept any agreement containing a cut in the capital gains tax -- a major goal of the president.

July 16: The White House reports that the estimated budget deficit for fiscal 1991 has reached $168.8 billion -- up $68.3 billion from January.

July 18: Over the protests of House GOP leaders and the administration, rank-and-file Republicans in the House approve a non-binding resolution opposing any new taxes to reduce the deficit. A heated summit meeting is held the next day, and Republican leaders and White House officials assure Democrats they will continue to bargain on all issues.

Aug. 1: Budget negotiations break off without agreement. Legislators and administration officials announce plans to resume the talks in early September, following the August recess.

Sept. 7: Negotiators from Congress and the White House meet at Andrews Air Force Base. The meetings break up 10 days later without a deal.

Sept. 19: The talks continue on Capitol Hill, with negotiations pared down to eight participants: House Speaker Thomas S. Foley (D-Wash.), House Majority Leader Richard A. Gephardt (D-Mo.), Senate Majority Leader George J. Mitchell (D-Maine), House Minority Leader Robert H. Michel (R-Ill.), Senate Minority Leader Robert J. Dole (R-Kan.), Treasury Secretary Nicholas F. Brady, White House Chief of Staff John H. Sununu and Darman.

Sept. 30: On the last day of the fiscal year, Bush and congressional leaders announce a deal that would cut the budget by about $40 billion in the first year and about $500 billion over five years. The Congress also passes a stopgap spending bill to keep the government functioning through Oct. 5.

Oct. 1: Fiscal 1991 begins.

Oct. 2: In a nationally televised address, President Bush appeals to Americans to support the "tough" deficit reduction package.

Oct. 5: The House rejects the budget package amid criticism that it is unfair and was reached behind closed doors. Most government operations close at midnight.

Oct. 7-8: Both House and Senate pass a stripped-down version of a budget agreement and a stopgap spending measure to keep the government functioning through Oct. 19. Negotiations continue over major components of the budget deal.

SOURCES: The Washington Post, Facts on File, Congressional Quarterly.

Compiled by James Schwartz -- The Washington Post