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House GOP Leaders Move Closer to Passing Tax Cut

By Eric Pianin
The Washington Post

House Republican leaders moved close to locking up passage of a $188 billion tax cut Monday after persuading rebellious GOP moderates to support the plan. In return the leadership agreed to a watered-down version of the moderates' demands for linking tax cuts to deficit reduction.

House Speaker Newt Gingrich [R-Ga.] voiced growing confidence that the tax package, the "crown jewel" of the "Contract With America," would pass when it is brought to the floor Wednesday or Thursday. However, Gingrich warned he would keep the House in session beyond the start of the Easter recess late this week unless the measure is approved. "If we don't pass this, we're not going home," he declared.

The tax plan, including a $500-per-child tax credit, a 50 percent reduction in the capital gains tax and numerous tax breaks for businessses and corporations, has encountered stiff resistance from congressional Democrats, some moderate and fiscally conservative House Republicans and influential GOP moderates in the Senate.

The proposal appeared in serious trouble a week ago, after a bipartisan coalition led by Reps. Michael N. Castle [R-Del.], Fred Upton [R-Mich.], and Glen Browder [D-Ala.], vowed to block passage of the bill unless the leadership agreed the tax cuts would not take effect until Congress completed work on a seven-year plan for eliminating the deficit and unless the tax cuts could be revoked any time Congress fell short of its annual targets for achieving a balanced budget.

Monday, Castle, Upton and freshman Rep. Bill Martini [R-N.J.] announced an agreement with the leadership to support the tax bill in return for legislative assurances the tax cuts could not take effect until the House and Senate completed work late this summer on a long-term budget to eliminate the deficit by 2002. In the event Congress misses a target for deficit reduction, the House and Senate Budget Committees would have to explain in detail the causes of the problem and suggest solutions for getting back on track.

But the moderates agreed to drop their demands that the tax cuts would be revoked in the event Congress missed a deficit reduction target, in the face of strong complaints from some House GOP leaders and business lobbyists that the proposal was unworkable and would make a sham of investment planning under the tax bill.

Castle, Upton and Martini Monday hailed the the compromise as a breakthrough that would provide what Upton described as "a solid insurance policy for deficit reduction" and tax relief. "Our amendment takes what otherwise would have been a tax bill and makes it part of a real plan to balance the budget," Castle said.

But Democrat Browder charged that the GOP moderates had bowed to pressure and intimidation from Republican leaders to return for a "fig leaf alternative."

"Their fig leaf will have fuzzy language about a deficit reduction glidepath, will put Congress in charge of determining wehther deficit reduction is being met, and will keep the special interest tax cuts even if the country sinks deeper in debt," he said.

Although the Republicans appear close to victory, they are still trying to assuage the concerns of more than 100 Republicans who favor limiting the $500 per child tax credit to families earning up to $95,000, instead of the $200,000 limit in the legislation.

They are also trying to prevent the defections of Reps. Connie Morella [R-Md.], Frank R. Wolf [R-Va.], and Thomas M. Davis III [R-Va.] The three oppose a provision that would require federal employees to make greater contributions to their pension plans as a way of offsetting the cost of the tax cuts.

Meanwhile, Gingrich and Senate Majority Leader Robert J. Dole [R-Kan.], announced the appointment of Jack Kemp to lead a Republican study group to recommend major revisions in the federal tax system by this fall.

Kemp, a former housing secretary and Republican House member who pioneered "supply-side economics" tax cuts, will lead an eight-member panel that will be charged with sorting through many of the competing Republican proposals for major tax reform, including a flat tax advocated by House Majority Leader Richard K. Armey [R-Texas].

Dole told reporters "We have asked Jack to re-examine the entire 9,000 page federal tax code - to start with a blank piece of paper and design a system that is flatter, fairer and simpler."