House Democrats Delay Tax-Cut Action, Set Hearings : Legislation: They rebuff GOP package backed by Bush and instead make preparations for a vote on a series of bills next year.

WASHINGTON —  House Democrats, faced with a sharp division in their ranks, decided Wednesday to defer immediate action on a tax cut for middle-income Americans but prepared to vote on a series of tax bills early next year by scheduling extensive hearings in December.

As Congress raced to go home for Thanksgiving, the House easily deflected a Republican tax-cut package endorsed at the eleventh hour by President Bush, voting, 248 to 144, along party lines not to allow a vote on the plan.

The main feature of the Republican plan would have been a reduction in the tax on capital gains, a proposal long sought by Bush. It also would have excluded from taxation up to $700 in interest earnings, would have given first-time home buyers a tax break on withdrawals from individual retirement accounts and would have provided a tax break for major real estate investors.

House Democrats, in contrast, had favored a proposal that would have provided an income tax credit of up to $200 for individuals and $400 for couples who are subject to Social Security withholding. To recoup the lost revenue, the Democrats proposed creating a new 35% top-bracket tax rate on high income taxpayers and imposing an additional 10% surtax on millionaires.

But despite the nearly unanimous recommendations of other Democratic leaders for a quick pre-Christmas vote on a tax cut to spur the lagging economy, Speaker Thomas S. Foley (D-Wash.) chose a cautious approach, virtually guaranteeing that there will be no December session of the House to take up tax legislation.

In a face-saving deal with House Republicans, the Democratic leadership promised to allow votes on an economic growth package by March 15 in the wake of Bush’s State-of-the-Union message to Congress in late January.

The delay means that the Democrats will not move now to seize the opportunity to get out in front of Bush on new economic action and cash in on public appeal for relief. But it avoids the risk of hasty steps that might have to be revised later or cause a damaging shock to the jittery stock and bond markets.

“If you do something precipitously, you might trigger adverse consequences in the economy,” said Rep. Steny H. Hoyer (D-Md.). “But, politically, it wouldn’t have been risky at all--the President gave us a real opening.”

Democratic congressional leaders, in an unorthodox move, decided against formally adjourning for the year but ordered an extended recess to preserve their option of calling the House and Senate back into session on 48 hours’ notice in case they change their mind about tax legislation. Congress finally quit at 7:05 p.m. EST--36 hours past the unofficial deadline for departure.

During the final day of the first session of the 102nd Congress, the Senate and House set a blistering pace by approving the following top priority legislation:

--A record-high $151-billion highway and mass transit bill that the Bush Administration estimated would create 4 million jobs over the next six years. It was the most sweeping change in transportation policy in decades.

--A bill to pump $70 billion into the government insurance fund that protects bank depositors against loss. Officials had warned that the fund was nearly broke.

--A related measure that would add $25 billion for reimbursement of depositors in failed savings and loan associations, enough to keep that fund solvent until next April. In an unusual move, the House avoided a recorded vote on the bill because many lawmakers did not want to be identified with the unpopular “bailout.”

--Legislation to authorize the President to spend up to $500 million to help Soviet republics dismantle nuclear weapons and provide U.S. military transportation for emergency food aid to the Soviet Union. This bill also provides $800 million for American victims of natural disasters and $1 billion for farmers suffering crop losses because of drought or floods.

Congress failed, however, to pass the controversial anti-crime bill, although the veto-threatened measure squeaked through the House by a 205-203 vote. A move to shut off debate in the Senate failed to get the required 60 votes.

The issue uppermost on the minds of the lawmakers, however, was how to revive the flagging economy at a time when consumer confidence is sinking and recovery appears to be elusive.

Bush’s demand on Monday that the House vote on a House Republican package of tax cuts, including his proposed reduction in capital gains taxes, angered many Democrats, including Foley, and they debated a counter strategy.

“A lot of us wanted to move directly to a mark-up (approval) in the next three weeks of a modest package of tax cuts and growth incentives for some sectors of the economy that are especially hurting,” said Rep. Vic Fazio (D-West Sacramento), vice chairman of the Democratic caucus.

Fazio said that House Majority Leader Richard A. Gephardt (D-Mo.), Majority Whip David E. Bonior (D-Mich.), Caucus Chairman Hoyer and all three Democratic deputy whips advocated a vote in December on a tax-cut bill but accepted the decision to undertake hearings instead to prepare for future action.

Caucus participants said that rank-and-file Democrats were almost evenly divided, however. “It’s not so easy to put together a quick tax package,” said Rep. Leon E. Panetta (D-Carmel Valley). “It could get out of control. . . . We have to move carefully.”

Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, said Monday that he was prepared to produce a Democratic tax-cut bill before Christmas. But then he met with the Democrats on his committee in a lengthy session that lasted until the early hours Wednesday.

“He got zero support inside the committee for doing a tax bill in December,” said Rep. Don J. Pease (D-Ohio), a member of the panel who attended the meeting.

The Democratic leaders decided to start hearings next week by the Ways and Means Committee on a variety of approaches to formulating a tax package.

“Everyone agrees that the American economy is stalled, but there is no agreement on what, if anything, the federal government can do to make things better,” Rostenkowski said.

At the same time, the Senate scheduled hearings for Dec. 12-13 on tax policy and the House Budget Committee planned to conduct hearings on the economic outlook earlier in the same week.

Key Actions by Congress

TRANSPORTATION: Both houses approved a $151-billion transportation bill with money for highways and mass transit that Transportation Secretary Samuel K. Skinner says could create 4 million jobs over six years.

‘JUNK’ CALLS, FAXES: The Senate gave final congressional approval to a ban on the use of automatic dialing machines to send unwanted calls and faxes from advertisers into private homes.

BANKING: Congress approved a bill to pump $70 billion into the nearly insolvent government insurance fund protecting bank depositors. It also passed a second bill to add up to $25 billion to the taxpayer cost of cleaning up bankrupt S&Ls.;

MEDICAID: Congress voted to forestall severe state Medicaid cutbacks but will require changes that affect future financing. The changes follow a dispute over how states get federal matching funds.

SOVIET AID: Both houses passed a $500-million allocation to help Soviet republics dismantle nuclear weapons and airlift emergency food. The bill also provides $800 million in domestic aid to natural disaster victims and $1 billion for farmers.

TAXES: House Democrats decided to defer immediate approval of a tax cut for middle-income Americans. The House easily deflected a Republican tax-cut package that included a capital gains cut.

CRIME: The House passed a bill imposing a five-day waiting period for gun purchases and capital punishment for 53 federal crimes. But the Senate failed to end a Republican filibuster, killing the bill.

Source: Associated Press