Clinton, GOP nearing compromise on tax relief

Wednesday, October 25th 2000, 12:00 am

By: News On 6

WASHINGTON (AP) _ President Clinton and congressional Republicans were nearing agreement Wednesday on a tax bill that would boost retirement savings, pay for health care, revitalize poor areas and help businesses absorb the cost of a higher minimum wage.

As the GOP worked to nail down the final pieces of their end-of-session tax cut, expected to cost just under $250 billion over 10 years, Clinton suggested in a letter Wednesday that he could support the legislation with certain key changes.

The offer, Clinton wrote Republican leaders, ``recognizes that both sides need to give a little in order to accomplish bipartisan tax legislation this year. ... In the spirit of compromise, I believe we can work together quickly to pass this balanced legislation that I can sign into law and that can benefit the American people.''

A short time later, House Speaker Dennis Hastert, R-Ill., said in a reply letter that Republicans would drop labor law changes opposed by Democrats from the two-year, $1 increase in the minimum wage.

``You may disagree with some changes in this bill, just as some of our members disagree with other details,'' Hastert said. ``But all Americans will see this bill as a victory for common sense, and I urge you to support it.''

Although the president did not fully embrace the emerging Republican plan, the letter was a marked departure from the partisan tax battles that have raged the past two years. Clinton has vetoed three major GOP tax cuts, including repeal of the estate tax and relief from the ``marriage penalty'' tax paid by millions of two-income couples.

House Majority Leader Dick Armey said Tuesday that Republicans were optimistic the legislation would become law.

``We're trying to make good law and we're expecting it to be signed,'' said Armey, R-Texas.

In his letter, Clinton backed the idea of providing tax relief for long-term health care costs _ Republicans want to create a tax deduction of between $5,000 and $10,000. The president suggested a blend of his proposed $3,000 tax credit for long-term care and a GOP tax deduction for the costs of buying long-term health insurance.

GOP leaders also want the legislation to include a full deduction for people who pay 50 percent or more of their own health insurance premiums and a $10,000 deduction for the costs of adopting a child.

The president also said he could accept a package of small-business tax breaks to offset the increased cost of a two-year, $1 increase in the hourly minimum wage if Republicans drop several proposed changes in labor law.

For instance, the president opposes a GOP plan to freeze the wage for waiters and waitresses, who also earn tips, at $2.13 an hour.

Clinton expressed unqualified support for a measure setting up a new tax regime to replace the Foreign Sales Corporation system for American exporters. That system was ruled an illegal trade subsidy by the World Trade Organization, and the United States faces a Nov. 1 deadline to enact the new law or face possible retaliation from the European Union.

In addition, there appear to be few differences between the White House and GOP leaders on a wide-ranging package of tax incentives aimed at reviving economically depressed areas.

Besides the trade and health issues, the bill was expected to include:

_Increasing the annual contribution limits for individual retirement accounts from $2,000 to $5,000 and for 401(k) plans from $10,500 to $15,000. A special IRA ``catch-up'' limit of $7,500 would apply to people over 50.

Republicans were wrestling with a provision that has drawn Clinton administration objections because it could mean greater pension benefits for a company's upper management at the expense of rank-and-file workers.

_An anti-poverty bill backed by Clinton that would expand empowerment zones where special tax and regulatory rules apply, spur capital investment in poor urban and rural areas, raise limits on low-income housing credits and provide tax incentives for Amtrak high-speed rail service.

Although the House Ways and Means Committee chairman, Rep. Bill Archer, R-Texas, opposes creation of numerous new tax credits, the Amtrak provisions are a top priority for Sen. William Roth, R-Del., who chairs the Senate Finance Committee. Roth is in a tough fight for re-election.

_Several business tax breaks to offset the higher minimum wage, including increased business meal tax deductions and an increase in current-year write-offs for business equipment.