GOP Leaders Hoping To Free Thrift Tax Plan From Legislative Limbo

Republican leaders are meeting to resolve a legislative logjam that has held up consideration of $3 billion in tax breaks for thrifts.

The tax provisions enjoy widespread support. But they are included as amendments to controversial health insurance legislation, which is mired in a side battle over medical savings accounts and expanded mental health coverage.

Both House and Senate bills protect thrifts from back taxes on bad debt reserves taken before 1988. The bills also make thrifts liable for $1.5 billion in taxes on reserves taken since Jan. 1, 1988, with the revenue used to pay for new health insurance initiatives.

"We never thought it would be this hard to give away $1.5 billion," said Brian Smith, director of policy development at America's Community Bankers, the thrift trade group.

The bad debt legislation reduces the back-tax exposure for thrifts that convert to national banks.

One of the thorniest problems holding up the bill involves medical savings accounts, which would operate like individual retirement accounts. The House bill authorizes the accounts, which Democrats deride as a gimmick for the rich and healthy.

Senate Labor Committee Chairman Nancy Kassebaum, R-Kan., the bill's cosponsor in the Senate, chose not to include them in her version, citing President Clinton's veto threat. But Senate Majority Leader Robert Dole, the GOP's likely presidential candidate, overrode the committee chairman and put them in the bill.

Sen. Edward Kennedy, the ranking Democrat on the Labor committee, has refused to let a House and Senate conference rectifying the two bills begin unless Sen. Dole backs down.

Frustrated by the delay, Republicans are now meeting informally to work out the differences between the two bills. An aide to Sen. Kassebaum said a compromise on medical savings accounts may be possible if the tax deduction limits or income eligibility ceilings are reduced. The talks are being led by Sen. Kassebaum and Rep. Dennis Hastert, R-Ill., head of the House Health Care Task Force.

But an aide to Sen. Kennedy said Republicans have made no offers yet. "If there's a possibility of working out an agreement, he'll be willing to listen," the aide said.

Sen. Kassebaum's aide said Republicans are trying to get the legislation through Congress before Sen. Dole resigns June 11 to pursue his presidential campaign.

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