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BUDGET TALKS NEAR DEADLINE

BUDGET TALKS NEAR DEADLINE

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Negotiators for Congress and the White House opened a final-weekend search on Friday for tax increases and spending cuts acceptable to enough lawmakers to avert disruption of major government services on Monday.

By most accounts, the negotiators were hung up over two perennially tough issues: Whether and how to tamper with Social Security benefits and whether and how to reduce taxes on capital gains.They were working through the Yom Kippur holiday Saturday, and the House and Senate scheduled sessions Sunday to deal with the emergency.

Differences were said to be narrowing but nobody was about to guarantee agreement before the new budget year begins Monday. ``There are some remaining issues that are very difficult that remain to be resolved,' said House Speaker Thomas S. Foley.

Meanwhile, the Office of Management and Budget, in a memorandum to agency heads, said government employees should report to work as usual on Monday - but be prepared to go home.

Members of both parties agreed it will be no easy job getting support among rank-and-file lawmakers for whatever agreement is reached by the leaders.

``Obviously, everybody wants something to pass but very few people want to vote for it,' Sen. Phil Gramm, R-Texas, said after briefing other GOP senators on what negotiators are doing.

``The best news we could get would be that the negotiators had reached an agreement,' said Rep. Byron Dorgan, D-N.D. ``But the big question is whether it can pass Congress.'

Delaying cost-of-living increases in Social Security benefits or increasing the portion of benefits subject to tax - both options are being considered - could weaken support for the package, especially among Democrats.

On the other hand, if Republicans are unhappy with the capital-gains provision or whatever offsetting tax increase on the wealthy is proposed to pay for it, they might walk away from the whole package.

Sources in both parties said a recent proposal to exclude from taxation any capital gain - profit from the sale of an investment - caused solely by inflation apparently was finding little favor among negotiators.

So, Republicans and Democrats exchanged new capital-gains proposals on Friday.

Democrats proposed to exclude from taxation 30 percent of capital gains. In turn, the current maximum 28 percent income-tax rate on the wealthiest Americans would be raised to 32 percent. Republicans pressed instead for excluding 40 percent of capital gains while raising the maximum income-tax rate on the wealthy to 31 percent.

Unless Congress and Bush can agree before Monday on a deficit-reduction package, $85 billion worth of arbitrary spending cuts will be triggered, affecting hundreds of programs though sparing others, including Social Security benefits and military pay.

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