House passes Democratic budget plan Party-line vote favors tax increase despite veto threat

October 17, 1990|By Peter Osterlund | Peter Osterlund,Washington Bureau of The Sun

WASHINGTON -- With thoughts of Election Day hanging heavy in the air, a bitterly divided House of Representatives adopted a Democratic proposal last night to raise taxes on the well-off, the keystone of a plan to slash $500 billion from the federal deficit during the next five years.

After hours of tense, partisan debate, Democratic lawmakers brushed aside threats of a presidential veto and won passage on a 227-203 vote, largely along party lines. Democratic leaders earlier had blocked Republicans from bringing a budget-cutting proposal of their own to a vote.

"Bound and gagged in the most important debate of the year," fumed Representative Mickey Edwards, R-Okla.

"The kind of bullying arrogance we've come to expect from the muscle-bound Democratic majority," harrumphed Representative Newt Gingrich, R-Ga.

The House measure was expected to be merged later this week with a Senate version. The White House has indicated that any bill from Capitol Hill that increases income tax rates would invite a veto by President Bush.

The political significance of the day's deliberations was lost on no one, coming just three weeks before the Nov. 6 elections and just three days before the government runs out of money.

Yesterday, President Bush reiterated an earlier promise to let the government shut down after midnight Friday if Congress has not passed legislation implementing a budget plan to his liking. The Democratic bill, he made clear, was not acceptable.

"It's a Democratic tax plan," the president said at a political rally in Glen Ellyn, Ill. "If it reaches my desk, the one that comes out of the House of Representatives, I will veto it because it raises the income taxes of the working men and women in this country, and I am not going to do that."

Mr. Bush has endorsed companion legislation drafted last week by Democrats and Republicans on the Senate Finance Committee that, in turn, mirrored a pact constructed earlier by the House Ways and Means Committee. Both of those plans stand in stark contrast to the Democratic plan passed by the House but hew closely to the broad outlines of the now-defunct budget summit compromise announced Sept. 30.

The House bill passed last night would increase a variety of taxes by $149 billion over five years, including one-time income tax boosts for all but the poorest Americans and a permanent increase in the top rate levied on the highest incomes, while cutting Medicare and agriculture spending.

It serves as the centerpiece of a larger plan to cut $40 billion from the current year's deficit and an additional $460 billion during the succeeding four years. Further deficit reduction would come in separate legislation reducing defense spending, as well as from reduced interest payments on the government's outstanding debt.

"The American people are willing to undergo unpleasant things to get this deficit under control, but they must be confident that no one is singled out, especially the poor and middle class," said House Majority Leader Richard A. Gephardt, D-Mo.

Earlier, House Republicans had rallied around their own deficit-reduction package, which would have relied on deep spending cuts and would have raised just $23 billion in additional taxes to reduce the deficit over five years by $400 billion. However, Democrats blocked the GOP measure from coming to a floor vote because it fell short of the $500 billion savings target agreed on by congressional leaders and the Bush administration.

"You're unable to meet the president's targets because you're unwilling to tax your rich friends," charged Representative Thomas J. Downey, D-N.Y.

Countered House Minority Leader Robert H. Michel, R-Ill.: "The Democrats say sock it to the rich: Their definition of rich is anyone who didn't vote for Carter, Mondale and Dukakis."

Actually, the Democratic bill would reach into the pockets of rich and middle-class alike, reducing the budget shortfall by $26.2 billion this year and about $195 billion over five years.

It would raise the income tax rate levied on better-off Americans -- individuals earning in excess of $109,100 and couples making more than $208,690 -- from 28 percent to 33 percent, while imposing a 10 percent surtax on annual incomes above $1 million. Upper-middle-income wage earners, too, would pay higher Medicare taxes: The 1.45 percent Medicare charge would apply to the first $100,000, compared with the $51,300 limit currently in effect.

Yet it would also delay automatic inflation adjustments of income tax brackets and the personal exemption for one year, while increasing taxes on liquor and cigarettes.

The effect of this would be to increase the tax bill for almost all Americans.

On the other hand, Democrats attached a provision providing a reduction in the capital gains tax rate geared toward middle-income wage earners.

Across the Capitol, the Senate prepared last night to debate the compromise plan assembled by its Finance Committee. That plan would not raise income tax rates, nor would it affect the capital gains tax rate, though it would limit the deductions taken by the well-off. Unlike the House Democrats' legislation, it would also double the 9-cent-per-gallon gasoline tax and increase from $51,300 to $83,000 the wage base from which Medicare taxes are deducted.

Ultimately, the two bills must be merged into one and signed by the president. The White House has indicated that any bill increasing income tax rates would invite a veto.

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