9-Cent Gas Tax Hike Urged for Economic Plan

WASHINGTON —  House negotiators Friday proposed increasing the federal gasoline tax by 9 cents a gallon, raising $40 billion over five years, in a bid to resolve the most politically sensitive issue in efforts to write a final version of President Clinton’s economic plan.

After a two-hour meeting attended by top congressional and Administration officials, House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) said that talks between House and Senate negotiators are showing “a great deal of movement.”

The House proposal would phase in the higher gas tax, raising the current federal levy of 14.1 cents a gallon by 6 cents the first year and by an additional penny each of the following three years.

That increase would more than double the 4.3-cent increase approved in the Senate version of the bill, and it was unclear how senators would respond. There were indications, however, that a compromise was in the works for an increase of about 6 or 7 cents a gallon.

The proposed 9-cent increase would raise significantly less revenue than the $72-billion broad-based energy tax proposed by President Clinton and originally approved by the House. The House had hoped that the energy tax would bring enough additional revenue to ease pressures to cut social programs.

“We’ll be back to you formally on Tuesday,” Senate Finance Committee Chairman Daniel Patrick Moynihan (D-N.Y.) told Rostenkowski as the session broke up.

Moynihan said that staff members from the two chambers also will be working over the weekend to find an acceptable means of cutting Medicare by roughly $54 billion over the next five years--essentially splitting the difference between the House bill and the more drastic cuts voted by the Senate.

Also “very much in play,” Moynihan said, is the issue of tax breaks for small businesses, which Clinton has said are crucial to the plan.

All sides said that they are optimistic the conference committee can complete its work next week and send the final package to the floors of both houses for votes before Congress begins its summer recess on Aug. 7.

“We’re in pretty good shape right now,” said one White House official who attended the discussion.

The negotiators also are still intent on meeting Clinton’s goal of reducing the projected deficit by $500 billion over the next five years.

Senate Majority Leader George J. Mitchell (D-Me.) declined to specify which issues are the biggest obstacles to reaching an agreement.

“This is all very difficult,” Mitchell said. “It’s a sticking point to raise taxes. It’s a sticking point to cut spending. It’s a sticking point to get $500 billion in deficit reduction.”

There seems to be little room for maneuver. The House plan had passed by a wafer-thin margin of six votes, while it took a tie-breaking vote by Vice President Al Gore to get the bill through the Senate.

Liberal Democrats in the House added to the pressure on the Senate-House bargaining by demanding that the final package include substantial human “investment” programs for child immunization, family preservation services, food stamps, tax breaks for the working poor and incentives for business investment in distressed urban areas.

Fifty-two liberal Democrats who belong to the Progressive Caucus signed a letter to Rostenkowski asking him to protect $31.4-billion worth of House-approved provisions that the Senate either dropped or pared down substantially.

To pay for the changes, the caucus proposed higher taxes on wealthy individuals and corporations--increases Senate-House conferees already have rejected in preliminary negotiations.

“These are the only programs to put people first,” said Rep. Major R. Owens (D-N.Y.), echoing the title of Clinton’s book “Putting People First,” published last year, which described his vision for renewing the country. “We don’t want them thrown overboard, and we are going to stand fast.”

Noting that the Clinton plan barely squeezed through the House, Rep. Peter A. DeFazio (D-Ore.) added: “We can’t be ignored.”