Congressional deficit-reduction efforts appeared headed for a partisan election eve showdown early today over whether to impose a special tax on millionaires, as the government's temporary spending authority was set to run out.
Senate Minority Leader Robert J. Dole (R-Kan.) and House Minority Leader Robert H. Michel (R-Ill.) spent two hours at the White House late last night consulting with President Bush about one of the House Democrats' most urgent demands: a surtax of as high as 10 percent on millionaires, according to congressional sources.
The talks, which also touched on the Republicans' preferred plan to curb income tax deductions and on a new stopgap spending measure, reached "no conclusions," according to a Michel aide.
Dole and Michel consulted with House Speaker Thomas S. Foley (D-Wash.) before meeting with Bush, the sources said.
If the president again refuses to accept the surtax, Democrats said, they were considering taking a House-Senate deficit-reduction package that includes the surtax to the House floor, inviting a partisan veto battle with congressional elections less than two weeks away. The House vote could occur as soon as today.
"The temperature will go up 300 degrees," House Budget Committee Chairman Leon E. Panetta (D-Calif.) predicted late last night.
The late-night meetings ended a day that began with House Democrats voicing strong objections to provisions of a tentative deficit-reduction package -- particularly to the lack of the surtax on millionaires -- and sending budget negotiators back to the bargaining table.
Strong Democratic support is needed because most House Republicans are expected to oppose any deficit-reduction agreement that includes tax increases, giving House Democrats considerable leverage in deciding the final shape of the deal.
House leaders were also prepared to bring another stopgap spending bill to the floor today to keep the federal government running at full force beyond 12:01 a.m. Thursday. The length of the new temporary authority had not been determined last night, House leadership aides said. Bush has not indicated whether he would sign another temporary spending bill.
Meanwhile, during a closed meeting of House Democrats yesterday, House Majority Leader Richard A. Gephardt (D-Mo.) raised the prospect of a continued session after the Nov. 6 elections in what would be the first lame-duck session since 1982, lawmakers said.
If Bush vetoes deficit-reduction legislation over a surtax on millionaires, Democratic strategists believe they can use the issue to paint Bush and the Republican Party as protectors of the rich. "It's now clear that he would want to shut this whole thing down over a small surtax on millionaires," Rep. Jim Slattery (D-Kan.) said.
Earlier, the negotiators appeared to be moving toward an agreement to even out the two top marginal income tax rates, cutting the rate for about 3.5 million upper-middle-income taxpayers and raising it for the approximately 600,000 richest Americans.
But they were deeply split over how to squeeze even more revenue from the wealthiest taxpayers. While Democrats insisted on the surtax, administration officials and GOP lawmakers preferred to raise taxes on the richest Americans by trimming the benefits of deductions for those who have adjusted gross incomes of more than $100,000 a year.
Last week, the House voted 227 to 203 along party lines to approve a deficit-reduction package that included a millionaires' surtax. In the Senate, lawmakers voted 51 to 49 to turn back an effort by Sen. Tom Harkin (D-Iowa) to include the surtax in the Senate version.
While 18 Democrats voted against the Harkin amendment, Senate Democratic leaders promised to oppose any changes to the measure as part of a bargain to garner enough GOP votes to win Senate Finance Committee approval of the bill's tax component.
In a partisan fight, however, Senate Democrats could unite behind the House provision and approve it. But it is doubtful they could muster enough support to overturn a presidential veto.
Earlier yesterday, House Democratic leaders presented the package without endorsement and described it as representing the latest compromise position being considered by the bipartisan negotiators. But House Democrats, who already have won major concessions on taxes and Medicare savings since the failure of the budget summit accord, pressed their leaders to move the bargaining closer yet to their positions.
Only about half the Democrats who attended yesterday's closed meeting said they could support an agreement that would level off the two top marginal income tax rates at 31 percent, limit the benefits of income tax deductions claimed by those with adjusted gross incomes higher than $100,000 a year and increase the federal 9-cents-a-gallon gasoline tax to between 14 and 16 cents.
That is far short of the 160 to 170 Democratic votes House Democratic leaders expect they will need to reach a 218 majority vote of the House. "There was not a great deal of happiness in there," Rep. Dale E. Kildee (D-Mich.) said.
Much of the unhappiness at yesterday's House Democratic meeting centered on a proposed provision that would raise taxes on the wealthiest taxpayers by disallowing deductions. Lawmakers from such high-tax states as California and New York complain that the limit would disproportionately affect taxpayers in their states because they are more likely to itemize deductions.
Democrats also were unhappy that the package did not include the surtax on millionaires.
The House Democrats' response angered Republicans, who called it a bargaining ploy. "We've accommodated enough," Dole complained. "Every time they want something, we give in."
But House Democratic leaders said they were simply trying to craft a package that could win House approval, not seek political advantage. "What we have to do is have the minority realize that we're trying to negotiate to pass a piece of legislation rather than make a political statement," Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) said.
"We have got to bring this matter to a conclusion this week and as soon as we can or it will not help anyone," Foley said.
Indeed, with Election Day so close, many Democratic lawmakers fear that voters are growing impatient with the protracted paralysis over the budget. "At this point, good government becomes the better politics," Sen. Kent Conrad (D-N.D.) said.
That concern is shared by the administration. Secretary of State James A. Baker III has privately urged Bush to strike a deal and put the issue behind him.
"Everyone wants to get it done," one administration adviser said. "The sentiment is to get a deal."
During the closed-door meeting of Democrats, anxiety about voter reaction to the deficit-cutting package prompted Rep. David R. Obey (D-Wis.) to point out that it would give lawmakers a tax cut as they were getting a pay raise, lawmakers said.
On Jan. 1, House salaries are to increase from $96,600 to $125,400. Negotiators have proposed cutting the marginal income tax rate for that income level from 33 to 31 percent. Under the Democratic tax plan, the annual tax bill for a typical couple filing jointly at the higher salary could be as much as $540 lower than under current law, according to Citizens for Tax Justice.
"We're effectively cutting our own taxes," one Democratic lawmaker said. "It could create some problems from the Republicans."
Staff writer Dan Balz contributed to this report.