WASHINGTON -- The Clinton administration's top negotiators yesterday outlined a compromise budget plan that appears to scale back substantially all of the President's tax-exempt bond initiative, including his urban enterprise zone proposal.

At a meeting of the House Democratic Caucus, Office of Management and Budget Director Leon Panetta said the new plan takes the Senate version of the budget package as its starting point. It then adds between $10 billion and $12 billion of energy taxes to pay for including some tax incentives that are in the House version of the bill but not in the Senate version, he said.

Panetta and other administration officials in recent days stressed that one of the three tax incentives that President Clinton really wanted to restore was his enterprise, or empowerment, zone plan. Under the House version, the plan would cost $5.1 billion, according to Joint Tax Committee estimates.

But Rep. Charles Rangel, D-N.Y., after a negotiating session with Panetta and top tax conferees yesterday, said there was discussion about substantially scaling back even that priority program.

Rangel did not say whether the discussions included scaling back or eliminating the bond component of the enterprise zones. He said he argued vigorously against any cuts.

"I would not want to see the President underfund" the program, because it could be a "true demonstration" of the effectiveness of enterprise zones, Rangel said.

Panetta said, "Everything is on the table," emphasizing that none of the House's tax incentives can be considered immune from cuts in the bill's final version if the negotiators are to reach their $500 billion deficit reduction goal.

The other two major tax incentives Panetta and Clinton have been trying to save in recent days are the Earned Income Tax Credit and liberalized expense deductions for small business. Combined, these provisions would cost nearly $29 billion to restore to the levels in the House version.

But given the small amount of added energy tax revenues the negotiators were allotting for such incentives, it is clear those other priority programs are also likely to be cut.

Not even mentioned by Panetta or other top administration negotiators yesterday was the fate of Clinton's high-speed rail bond proposal, which also was dropped in the Senate plan, and his proposed permanent extensions for mortgage revenue bonds and small-issue industrial development bonds, which the Senate agreed to extend only through June 30, 1994.

Restoring those provisions to the level contained in the House version would cost $692 million, according to the committee estimates.

Panetta and Treasury Secretary Lloyd Bentsen made it clear after the caucus meeting yesterday that they are budgeting little, if any, room in their compromise plan for restoring such provisions, which have not been named as priorities.

Bentsen said the administration is now pushing for an energy tax between $30 billion and $34 billion, a level only $8 billion to $12 billion above the $22 billion transportation fuels tax in the Senate bill and less than half of the $72 billion broad-based energy tax in the House bill.

Panetta said the compromise level would translate into a gasoline tax increase of between 5 cents and 6 cents a gallon -- little above the 4.3 cent level in the Senate plan.

Panetta said the administration is now also accepting the higher level of Medicare cuts in the Senate bill. But even with those $8 billion in additional cuts, he said, that would leave little room for including the House's generous tax incentives in the final plan.

House Speaker Thomas Foley, D-Wash., also indicated yesterday that House members will have to accept some cuts in their proposed tax incentives. He noted that while some groups, like the Congressional Black Caucus, have made "nonnegotiable" demands to include the enterprise zones and the earned income credit, in the end such groups will be faced with the choice of voting for a compromise bill or nothing at all.

Clinton also indicated late Tuesday that because of the administration's decision to accept an energy tax close to the Senate level, budget negotiators are having to use the rest of the Senate bill, with its incentives cuts, as the starting point for a final plan.

In an interview, clinton applauded the Senate's small gas tax increase, but said, "We want to add something to what the Senate did. We want to put back some incentives for people to pay lower taxes if they invest in jobs and growth."

At the caucus meeting, several Democrats told Panetta that they still are hoping that the tax and budget conferees can eliminate the energy tax altogether. And several told reporters after the meeting that they remain dissatisfied with the level of energy taxes in the administration's proposed compromise.

"The members want to roach the $500 billion goal, and keep all the investment incentives, and drop the energy tax," said Panetta afterward. "But the problem is, the numbers don't work" if you try to do all those things together.

Meanwhile, the second day of the tax conference found House negotiators signaling their willingness to make changes in the House bill's proposal on enterprise zones.

The plan would create 10 so-called empowerment zones, which would receive a large array of tax incentives and other federal benefits, and 100 enterprise communities, which would receive a smaller number of incentives. The plan would create a new category of exempt facility bond to be used to finance businesses in the 110 areas.

The House negotiators, after meeting privately Tuesday night, transmitted an offer to the Senate lawmakers designed to resolve some of their differences, although at this early stage of the conference there were few areas in which the negotiators seemed willing to compromise.

One exception, however, was enterprise zones, where the House negotiators listed their position as being "open," a signal to the Senate that changes could be worked out in the proposal, lobbyists said. The House lawmakers, however, did not spell out what changes they were willing to make.

On the other three bond provisions in the bill, the House negotiators said they wanted to see the House version prevail. Those are permanent extensions for the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds, and the elimination of volume cap restrictions oh high-speed rail bonds.

The Senate bill would extend the mortgage bond and IDB exemptions only through June 30, 1994. The bill does not include provisions on enterprise zones or on high-speed rail bonds.

Senate negotiators met privately yesterday afternoon to discuss the House offer but as of press time had not drafted a counteroffer, congressional aides said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.