Gop Tax Package Rocked By Threat Of Defections Moderate Republicans Join Democrats In Opposition

A coalition of moderate Republicans and conservative Democrats vowed Friday to block passage of the House GOP’s $188 billion tax package unless the tax cuts are linked to progress on reducing the deficit.

The bipartisan proposal, jointly announced by Republican Reps. Michael N. Castle, Del., and Fred Upton, Mich., and Democrats Glen Browder, Ala., and Bill Orton, Utah, has further complicated House leaders’ efforts to pass the costly tax plan before the Easter recess.

This is the second major challenge to the bill in a week. House Speaker Newt Gingrich, Ga., and other GOP leaders balked earlier this week when 102 moderate and fiscally conservative Republicans sought to scale back the cost of the package by limiting a proposed $500-per-child tax credit to families making up to $95,000 a year, instead of the proposed $200,000 threshold.

Gingrich and others concluded it would be too risky politically to backtrack on one of the most important elements of their “Contract With America,” despite the threat of GOP defections.

But Friday’s announcement greatly raises the stakes. Castle and Upton warned that “more than enough” Republicans have indicated they would vote with Democrats to block the bill unless they were allowed a vote on their amendment.

Castle and Upton represent a group of about 40 moderate and centrist Republicans attempting to shape GOP policy. Many in this group also signed the letter urging that the tax credit be scaled back. But while the letter signers did not threaten to withhold their support if they did not get their way, these Republicans are intent on opposing the bill if their request is not met.

With growing indications that few, if any, Democrats will vote for the Republican tax plan, GOP leaders cannot afford more than a dozen or so defections and still pass the bill. There are 230 Republicans; Gingrich needs 218 votes to pass the bill.

Castle insisted the bipartisan plan was “totally in the spirit” of the Contract With America’s goals of tax relief and deficit reduction. Orton said, “There’s a common theme, across party lines, that we must take care of deficit reduction first.”

Under the bipartisan proposal, the tax cuts would take effect once the Office of Management and Budget certifies that Congress had approved a budget plan that would eliminate the deficit by 2002. The tax cuts would remain in effect provided Congress meets annual incremental targets for lowering the the deficit. If a target is missed, the tax cuts would be revoked the following January.

Gingrich described it as an “interesting thought” and told reporters, “I’m not ruling anything out.” However, House Majority Leader Richard K. Armey, Texas, vigorously opposes any proposals for changing the tax-cut package that emerged from the Ways and Means Committee a week ago. “Armey favors staying with the contract language,” said Edward Gillespie, a leadership spokesman.

The GOP tax package includes the $500 tax credit, a sharp reduction in the capital-gains tax, large tax writeoffs for businesses and corporations and a generous new individual retirement account for middle and upper-income Americans.

Republican leaders and some business groups say the bipartisan proposal linking tax cuts to deficit reduction is unworkable and would create too much uncertainty for businessmen and investors. “It would be like playing Russian roulette in the market place,” said Mark Bloomfield of the Council for Capital Formation.

The GOP tax package has drawn strong fire from congressional Democrats and moderate Senate Republicans who oppose tax cuts before Congress makes headway in efforts to balance the budget.