
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, March 13, 1990                   TAG: 9003133322
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A1   EDITION: METRO 
SOURCE: The Baltimore Sun
DATELINE: WASHINGTON                                 LENGTH: Medium

TAX-BOOST PLAN DRAWS INTEREST OF WHITE HOUSE

A plan to raise taxes, cut spending and eventually eliminate the federal government's deficit received an unexpectedly warm reception from the Bush administration Monday, which said there was "room to talk" about the sweeping proposal offered by House Ways and Means Chairman Dan Rostenkowski, D-Ill.

The package would increase taxes on gasoline, cigarettes, alcohol, and high-income wage earners, while freezing for a year at current levels Social Security and Medicare payments, as well as virtually all domestic programs and the defense budget. After five years, Rostenkowski contends, his suggested revenue increases and spending reductions would leave the government with a surplus.

White House officials appeared to embrace the plan mostly out of hope that it might draw congressional Democrats into negotiation toward a "grand compromise" on the budget - a long anticipated agreement that might include tax increases and restrictions on the growth of Social Security and other entitlement programs. None, however, suggested that they were about to endorse the specifics of Rostenkowski's package.

Indeed, administration spokesman Marlin Fitzwater explicitly stated that President Bush had not yet retreated from his opposition to tax increases or changes in the Social Security system.

"I'm not signaling any action on our part except to say this gives us a basis for discussion," Fitzwater said. "We don't want to pour too much cold water on a plan we may want to swim around in for a while."

The administration, unwilling to suggest tax increases or major spending cuts, has actively sought a "summit" of Democratic and Republican leaders. Many Democrats have resisted those entreaties, preferring instead to leave the White House in its uncomfortable position.

When asked whether they might be drawn into budget negotiations this year, Democrats frequently cite last year's experience. After reaching a comprehensive budget agreement, the administration threw its weight behind a proposal to reduce the capital gains tax rate. Passage was eventually blocked in the Senate, though Democratic leaders asserted that the administration had broken the spirit of the budget agreement when it supported the capital gains proposal.

Rostenkowski proposes to reduce the deficit by $511.6 billion by 1995, leaving the government with a $34 billion surplus, as compared with its present estimated deficit of $161 billion.

To those ends, he suggests a combination of spending cuts, an increase from 28 percent to 33 percent in the income tax rate paid by top-tier wage earners; higher taxes on gasoline, liquor and cigarettes; and a one-year freeze in most federal expenditures for most programs including Social Security.

Rostenkowski also would do away with the Gramm-Rudman deficit-reduction law, which forces deficit reduction in annual installments.

The most enthusiastic response to all that may have come from a Republican, Senate Minority Leader Robert Dole, R-Kan., who called Rostenkowski's proposal a "good step" and said its across-the-board spending freeze "makes a great deal of sense."

"His proposal could be the wake-up call we've been waiting for," Dole said. "We'll see who answers it."

by CNB