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House Caucus OKs Tax Cut Plan

By Art Pine
Los Angeles Times

WASHINGTON

The House Democratic Caucus grudgingly approved a package of election-year tax cuts Thursday after removing a controversial provision that would have reduced income taxes for corporations.

The approval means that the full House will be asked to choose among three tax-cut plans next week: the Democratic bill, the package that President Bush proposed Jan. 28, and a streamlined version of the president's plan put together by House Republicans.

Democratic House leaders said Thursday they believed they would be able to muster enough votes to defeat both Bush's package and the GOP plan and then enact their own plan and send it to the Senate.

House Speaker Thomas S. Foley (D-Wash.), told reporters after the caucus session he was confident that the Democratic alternative would prevail. "This does more for tax fairness, this does more for economic equity," he said.

But several lawmakers warned that sentiment for the package was so thin during Thursday's caucus that it still was unclear whether enough Democrats ultimately would support the measure, even without the reduction in the corporate rate.

"It's going to be very tight," said Rep. James P. Moran, (D-Va.), who emerged from the caucus early after listening to both sides. "There are going to be a lot of people who hold their noses and vote for this -- probably myself included."

Apparently weighing heavily on some members' minds was the victory of former Sen. Paul E. Tsongas (D-Mass.), in the New Hampshire primary Tuesday. Tsongas is the only major Democratic presidential candidate who opposes the Democratic tax-cut plan.

The centerpiece of the Democratic plan is a $200-a-person tax credit aimed at helping middle-income taxpayers, combined with a reduction in tax rates on capital gains, which are profits from the sale of stocks or other assets, and breaks for business and real estate.

It would pay for these tax cuts by raising taxes on the rich, increasing the maximum tax bracket for those earning $85,000 or more to 35 percent, from 31 percent now, and imposing a 10 percent surtax on millionaires. Bush opposes the bill primarily because of those tax increases.

Bush's plan would provide a similar menu, but would provide a less-generous tax break for middle-income Americans and would postpone it until next January, and would pay for the tax cuts by changing the accounting rules for some portions of the federal budget.

Meanwhile, Sen. Lloyd Bentsen (D-Texas), chairman of the Senate Finance Committee, said any tax-cut bill that his panel turns out would be paid for by raising taxes elsewhere, as the House bill would, not by rechanneling savings from defense spending cuts.

Bentsen's committee is scheduled to begin drafting its own version of the tax bill Feb. 27. The Texas Democrat has not said yet precisely what it will contain, but strategists expect it to be closer to the House Democratic alternative than to Bush's original package.

Thursday's approval by the House Democratic Caucus came after a contentious closed session in which caucus members expressed strong reservations about various portions of the bill, forcing a poll on a proposed one percentage-point cut in corporate tax rates that led to eliminating it from the bill entirely.