Democrats who control both houses of Congress are ready to battle over a bill that would cut the budget deficit by $500 billion over five years.
The House GOP is debating whether it should sit out the fight because of the all-out opposition to higher taxes or offer a substitute plan with almost no chance of passing.Senate Republicans are more inclined to side with President Bush, who swallowed his no-tax-increase pledge in the interest of slashing the deficit.
"If we could do it all through spending restraint, that would be ideal," said Senate Republican Leader Bob Dole of Kansas. "That's not going to happen."
A showdown could come as early as Wednesday in the House and Thursday in the Senate.
House Democrats, trying to take back a big part of the wealth that shifted into the hands of higher-income Americans over the past decade, are pushing a $149 billion tax increase.
Nearly two-thirds of that would fall on the 13 million or so couples and individuals with incomes above $50,000 a year.
In the Senate, where Democratic control is not nearly so solid, the Finance Committee picked up backing from most of its GOP members in approving a $142 billion tax increase, about 40 percent of which would be paid by those earning more than $50,000. The 15-5 bi-partisan vote on the middle-of-the-road plan came early Saturday morning.
There is another glaring difference between the two bills.
The liberal House plan wouldn't touch the gasoline tax - and sponsors admit the reason is purely political. The Senate version would raise the 9-cent-a-gallon tax by 91/2 cents a gallon over the next 15 months.
The tax increase that House Democrats chose to replace the gasoline tax would not be as obvious, but it would hit every person who files an income tax return.
It would forgo next year's annual adjustment in the income tax rates and personal exemptions designed to offset inflation - to prevent bracket creep that can give the government an ever-increasing share of any cost-of-living pay raise.
Thus, more income would be taxed at higher rates, the personal exemption would be about $100 less than present law provides for 1991, and taxpayers would turn over another $36 billion.
Both bills would raise taxes on cigarettes, alcohol, airplane tickets and such luxury items as expensive cars, planes and jewelry.
Both would require the 33 million Medicare beneficiaries to pay more each month for Part B insurance for doctors' bills and to pay slightly more each year before Medicare starts picking up the tab.
Both would hit the insurance industry for about $8 billion in extra taxes and require state and local government workers who are not covered by a public pension to join Social Security.
Both would cut more than $13 billion in agriculture spending.
The Senate bill reflects the home-state interest of Sen. Lloyd Bentsen, D-Texas, chairman of the Finance Committee. It includes $3.4 billion worth of tax incentives for the oil industry, aimed at reducing U.S. dependence on imported energy.
After nearly two years of bashing Bush's efforts to cut capital-gains taxes, which apply to profits from investments, House Democrats sought to broaden support for their bill by including a capital-gains reduction of their own. But it's aimed to help middle-income Americans, not provide the incentive to big-dollar investors that some economists say is needed.
The Bush administration was quick to endorse the Senate bill as far preferable to the House Democratic plan.
"This bill is not perfect but it is satisfactory," said Sen. Bob Packwood of Oregon, senior Republican on the Finance Committee.
Sen. Bill Armstrong, R-Colo., reflected the views of most House Republicans about any bill that would raise taxes when the economy is sagging.
"I'm convinced this is really dumb," he said.
There also is some discontent among Democrats.
Sen. Max Baucus, D-Mont., voted no because of the gasoline tax increase, which he said discriminates against his and other rural states. Sen. Bill Bradley, D-N.J., wouldn't vote for raising Medicare charges while giving "new tax breaks for wealthy oil and energy investors."
The tax increases and Medicare changes are only a big piece of the packages to cut the deficit, which without some action will be around $300 billion in 1991.