WASHINGTON -- President Clinton indicated yesterday he wants House and Senate conferees to retain provisions in the final version of his tax package that would extend two popular bond programs and ease some curbs on tax-exempt bonds.
But his top budget negotiator, Office of Management and Budget Director Leon Panetta, said the bond provisions and other tax incentives Clinton proposed are likely to be cut back because a movement is growing among conferees to include only a small energy tax or no energy tax at all.
The $72 billion broad-based energy tax in the House bill has been used in large part to finance Clinton's $47 billion of bond initiatives and other tax incentives. "Those are the three key moving parts" in the negotiations, Panetta said," investments, [top individual and corporate tax] rates, and the energy tax."
Panetta made his remarks after Clinton told the conferees in a speech that while deficit reduction is the most important goal of the budget and tax plan, some tax incentives must also be kept in the package.
"We've got to have incentives in the final bill to spur growth, to create jobs," Clinton said. The President declined to be specific about which incentives he favored, other than to say he feels "very strongly that we ought to create empowerment zones," or enterprise zones.
The House version of the bill includes an enterprise zone provision proposed by Clinton that would create a new category of exempt-facility bond to be used to finance zone businesses. It also contains a provision that would eliminate volume-cap restrictions on high-speed rail bonds. The Senate bill contains neither provision.
Other bond provisions that will be negotiated by the conferees include extensions of the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds, which expired June 30. The House bill includes President Clinton's proposals for making those two exemptions permanent, while the Senate bill would extend them only through June 30, 1994.
One of the House tax conferees, Rep. Charles B. Rangel, D-N.Y., a strong supporter of the mortgage bond exemption, said in a brief interview he was hopeful a permanent extension would be included in the final bill, but that finding the money to finance it remains an obstacle.
Rangel said he would be willing to include a 10 cents-per-gallon fuels tax increase in the bill to help pay for permanent extensions and other tax incentives in the House version of the bill. But he said other conferees are reluctant to accept even the small 4.3 cents tax in the Senate version of the bill.
Rep. William Coyne, D-PA., the chief sponsor in the House legislation to make the IDB exemption permanent, said he believes the chances for a permanent IDB extension are 50-50. Coyne, who is not a conferee, said he would "push very hard" for the negotiators to approve a permanent extension.
Vice President Albert Gore, who accompanied Clinton to Capitol Hill for his speech, was asked afterward if Clinton still supports permanent extensions of the expired tax provisions, which besides the bond exemptions include a number of tax credits that also expired on June 30.
But Gore declined to be specific, saying only that Clinton "is very interested in the investment program to create jobs."
Earlier in the day, in their first substantive negotiation, the conferees tentatively agreed to make the low-income housing tax credit permanent. The credit, which expired June 30, 1992, is often used in conjunction with tax-exempt multifamily housing bonds to finance low-income rental projects.
The conferees also tentatively agreed to raise the top corporate income tax rate to 35% from 34%, for firms with annual taxable incomes of more than $1 0 million.
The housing credit and the corporate rate proposals were among several that were identical in both the House and Senate bills, and which the conferees approved yesterday. But Senate Finance Committee Chairman Daniel P. Moynihan, D-N.Y., chairman of the conference, cautioned that those decisions could be revisited later.
"Nothing is agreed to until everything is agreed to," Moynihan said.
House Ways and Means Committee Chairman Dan Rostenkowski. D-Ill., in particular has said he wants to keep the top corporate rate at the 35% level approved tentatively by the conferees, but Panetta and Senate Budget Committee Chairman James Sasser, D-Tenn., said that raising the rate to 36%, as originally proposed by Clinton, is still being discussed among negotiators.
Sasser, who spoke after a meeting with President Clinton Monday evening, said a growing number of conferees who favor eliminating the Senate bill's $23 billion gas tax entirely would like to raise the corporate rate to replace $15 billion of the revenues that would be lost by such a move.
Sasser said Clinton faces a choice between fighting what could be a losing battle to save the energy tax, or cutting his tax incentives, including the bond provisions.
"The real question is what happens to the energy tax. Is it more important, or are the growth incentives more important, because those will have to be paid for by the gas tax," he said.
Larry Stein, chief counsel of the Senate Budget Committee, said there is a "live movement" among the Senate conferees to ditch the energy tax entirely and replace it with higher top tax rates on corporations and individuals. A number of House conferees have already proposed such a plan.
But he said he doubts the conferees in the end will drop the energy tax, because they will need its revenues to pay for at least some of the Clinton tax incentives.
Laura Tyson, chairman of the Council of Economic Advisers, agreed in a separate interview on television. She and other White House officials said they examined the possibility of doing away with the energy tax entirely, but concluded it could not be done while retaining the most important Clinton tax incentives and achieving the overall goal of $500 billion in deficit reduction.
"It seems to us it's likely there will be an energy tax in the final plan," she said.
Rostenkowski said the tax conferees hope to finish their deliberations by the end of next week. That would give the House and Senate one week to take a final vote on the package before the month-long congressional recess that begins Aug. 6.