$189 Billion Tax-Cut Bill Faces Fiery House Battle

THE tax bill cometh.

Culminating their 100-day legislative drive, House Republicans bring to the floor this week a package of tax cuts that is the most controversial provision in their Contract With America.

The contest over tax cuts has been percolating for weeks, drawing clear lines between the two parties, House and Senate Republicans, and Congress and the White House.

Proponents of the Republican package argue that tax cuts are a moral imperative, a sign of the GOP's commitment to reduce the federal deficit by lifting the burden of federal government off the people. Critics counter that the package is tilted toward the wealthy and that cutting taxes impedes balancing the budget.

More is at stake than whether the $189 billion package passes. GOP support in the Senate could hinge on how much momentum it has coming out of the House. The party that wins may gain the upper hand in budget battles later this spring.

''This tax debate ... is probably the greatest difference and the most important difference that exists between our parties,'' says minority leader Richard Gephardt (D) of Missouri.

Though House GOP leaders remain committed to their package -- which Speaker Newt Gingrich calls the ''crowning jewel'' of the Contract -- a growing number of moderate Republicans and conservative Democrats have come out against the measure, putting its passage in doubt.

One bipartisan group wants tax cuts to be offered as a kind of dividend of deficit reduction, seeking a guarantee that the cuts will be offered only after progress toward a balanced budget has been established. The Republicans had originally promised to provide details of how they would pay for the tax cuts, which the Treasury Department estimates will cost about $630 billion over 10 years. Instead they have provided only the general outlines of what they would cut.

''The first 100 days will not be significant in the long run if we don't step forward and balance the budget,'' says Rep. Joe Scarborough, a freshman Republican from Florida. ''We have to balance the budget before we start cutting taxes.''

Another group of 105 Republicans has urged the leadership to lower the eligibility for the central tax cut -- a $500 per child tax credit for families. They would make it available to families making no more than $95,000 a year. Currently, it is available to those earning up to $200,000.

The House leadership huddled through the weekend to devise a strategy for bringing dissenting Republicans on board. With Democrats mostly opposed to the plan, Republicans can afford few defections. And following last week's defeat of term limits, failure to pass tax cuts would be politically costly.

Rep. John Boehner (R) of Ohio, the fourth ranking Republican in the House, says the leadership would probably not alter the family tax credit, but would produce language linking the tax cuts to deficit reduction. The concerns of recalcitrant Republicans ''are born out of the concerns of constituents about balancing the budget,'' he says. ''Any tax cut has to be a part of a larger effort to balance the budget.''

While the House debate focuses on the immediate task of finishing the Contract, the tax battle in the Senate is increasingly becoming tied up in presidential politics. One candidate, Sen. Phil Gramm (R) of Texas, like many younger conservatives, supports a tax package similar to the House plan, though somewhat smaller in scope. The older guard, including candidate and majority leader Bob Dole (R) of Kansas, reside more cautiously on the side of deficit reduction.

And Senator Dole raised the stakes with the White House on Friday, vowing to prevent any bills President Clinton supports from reaching the floor unless Democrats stop obstructing GOP tax legislation.

Sen. Edward Kennedy (D) of Massachusetts vows to filibuster unless the Senate first considers his amendment to close a loophole that allows wealthy Americans to renounce their citizenship to avoid taxes. A vote to prevent the filibuster is scheduled for today.

But the House tax proposal gained some support in the Senate Saturday when Sen. Robert Packwood, chairman of the Finance Committee, which has jurisdiction over tax bills, said tax cuts would be possible if House Republicans show how to balance the budget without touching Social Security.

House Democrats, reflecting the popularity of deficit reduction, scaled back a tax-cut proposal by Mr. Gephardt from roughly $66 billion to $25 billion. Their proposal targets mainly middle-class Americans. The centerpiece of the plan includes a deduction for college tuition, starting at $5,000 in 1996 and rising to $10,000 by 1999. It also makes interest on students loans deductible and expands the eligibility of deductible IRA contributions.

Ways and Means Committee chairman Bill Archer (R) of Texas, one of the principal proponents of the House Republican plan, argues that Democrats overlook the fact that wealthier Americans pay more taxes. The top 10 percent pay 47 percent of the nation's taxes. Despite Democratic claims that the GOP package is targeted toward the wealthy, Mr. Archer says the wealthiest Americans will still account for the same percentage of overall revenues under the GOP plan.

Thus, beyond the family tax credit, the GOP plan also includes: tax credits for adoption and care of elderly family members; a capital gains tax rate reduction; and an end to alternative taxes owed by businesses that escape other tax requirements through deductions and credits.