Democrats bid to drop Clinton energy tax, imperiling bond items.

WASHINGTON -- President Clinton's tax-exempt bond initiatives faced increased jeopardy yesterday as a movement gathered steam among House Democrats to ditch Clinton's proposed energy tax and, along with it, many such tax incentives included in the House version of the budget bill.

But White House press secretary Dee Dee Myers said the President will press House and Senate conferees meeting over the budget later this month to adopt as many of the tax incentives as possible, along with the broad-based energy tax that finances them.

Included in the House bill are Clinton's proposed permanent extensions for mortgage revenue bonds and small-issue industrial development bonds, as well as his proposed high-speed rail bonds and urban empowerment zones, which would include a new kind of exempt facility bond.

"He wants both an energy tax and his investment provisions." particularly the urban empowerment zones, Myers said, because they are still needed to stimulate selected investments and job growth and to restructure the lagging economy.

Myers' comments came after the House Democratic Caucus met for the first time to discuss a proposal 34 members are pushing that not only caves in to the Senate's version of the budget, which drastically scales back both the energy tax and the bond provisions, but goes one step further and eliminates the energy tax entirely.

The Senate had opted to cut Clinton's proposed $7:2 billion energy tax by $49 billion and, in its place, raise revenues by eliminating such incentives as the empowerment zones and high-speed rail provisions and curtailing others such as the permanent bond extensions, which were cut back to June 30, 1994.

Bond proponents have been hoping that the House bond provisions would be adopted by the budget conferees when they negotiate a final bill. But any successful drive to eliminate the energy tax likely would doom the more favorable House bond provisions.

The purpose of the closed-door caucus was "to raise the possibility of having the conferees totally drop what's left of the energy tax" in the Senate plan, said Rep. David Obey, D-Wis., who argued before the caucus that the energy tax has become a liability for Democrats running for re-election next year.

Obey indicated that his plan, which is gaining the support of Democrats on all sides of the spectrum, presupposes that the House would accept most of the Senate's alternative revenue raisers. "Most of the incentives are already gone in the Senate package, and I don't cry about that," he said.

To make up for the additional lost revenue from jettisoning the remnants of the energy tax, Obey is proposing to raise the top corporate tax rate from 34% to 36%, as proposed by Clinton, rather than to 35%. as proposed in both the House and Senate bills. He also would the top personal income tax 37% rather than to 36%.

House Budget Committee chairman Martin Sabo, D-Minn., said he is "intrigued" by Obey's proposal and believes it is attracting "significant interest" among House Democrats. Sabo, like Obey, said he supported Clinton's original energy tax proposal, but now believes it was gutted in the Senate to the point that it is ineffective at either of reducing the deficit or promoting energy conservation.

Getting rid of the energy tax "might enhance the overall chances of passage" of the budget plan, as long as it is crafted to ensure maintenance of the plan's goal of reducing the deficit by $500-billion over five years, Sabo said.

Myers and Rep. Bob Wise, D-W.Va., said the caucus did not decide to support or reject the proposal yesterday, but will meet to discuss it again after the House returns from its Independence Day recess on July 12.

Wise said he believes the idea of ditching, the energy tax will be accepted in the end. "I think it will take on some life. A broad-based energy tax has trouble floating now, since there aren't the votes to pass it in the Senate, and the public sees it as unfair," he said.

According to Wise, House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., told members of the caucus that he would support the move to eliminate the energy tax "if it gets 218 votes to pass in the House" and if the lost revenues are recouped by other means.

Rostenkowski told reporters after the meeting that he would not support Obey's proposal to increase the top corporate rate to 36%. however, since that has not been included in either the House or Senate bill and thus may not be an option for the conferees.

Myers, on the other hand, said that while the President is not yet ready to jettison the energy tax, he may be open to raising the top corporate rate to 36% as he originally proposed.

Wise said one aspect of the Obey plan that was not fully discussed by the caucus was the concern that economic growth could be dampened by the elimination of most of the Clinton tax incentives. "George Bush's mistake was to focus only on deficit reduction" rather than growth in his final budget plans, he said.

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