In what an excited House Budget Chairman Kasich dubbed "a dream come true," Clinton administration and GOP budget negotiators reached agreement Monday on a spending bill to balance the budget by 2002 and a separate bill cutting taxes by nearly $92 billion over five years and by up to $285 billion over 10 years.
Shortly before 8 p.m., Senate Majority Leader Lott told reporters: "We have reached a tentative agreement with the administration on the balanced budget and tax legislation that is pending review of the statutory language."
Emerging from several hours of talks in Lott's Senate office, White House Chief of Staff Bowles confirmed the deal and said, "We couldn't be more pleased with the outcome."
House Speaker Gingrich described it as "a fabulous agreement" and predicted "the deal will sell itself" and pass the House.
President Clinton, who was in Las Vegas Monday, is expected to announce the agreement at a White House news conference today when details of both bills are expected to be released after an overnight review by the staff. Lott said the Senate would take up the spending bill Wednesday and the tax bill Thursday; House Majority Leader Armey said the House would follow the same schedule.
The tax bill, which participants said was the more difficult to resolve, includes capital gains tax rates of 10 percent for those in the 15 percent tax bracket and 20 percent for those in higher tax brackets. But in a new development, those tax rates would fall in 2001 to 8 percent and 18 percent, respectively, for assets held at least five years, GOP sources said.
A GOP source said Republicans got the lower capital gains tax rate in later years "in return for dropping indexing", a top priority of House Ways and Means Chairman Archer that the administration said would prompt a veto if included in the final version.
The GOP source called the lower rates beginning in 2001 "the icing on the capital gains cake."
Negotiators also agreed to a higher cigarette tax to help fund increased health care for children, but decided to put that tax and the proceeds in the spending bill, not the tax bill, participants said.
Negotiators and aides said the net tax cut would total nearly $92 billion over five years and between $260 billion and $285 billion over 10 years.
Those totals are higher than the $85 billion over five years and $250 billion over 10 years called for in the May balanced budget agreement. But GOP participants said the administration would support the higher tax cut levels.
The per-child tax credit, a major sticking point in negotiations, will total $400 in 1998 before rising to $500. In a major GOP concession to the administration, and a move that likely will help produce more Democratic votes on the floor, the family tax credit will be available in addition to the Earned Income Tax Credit for working families making $18,000 a year or more.
The GOP bill would not have provided any of the per-child tax credit to families making $24,000 a year or less. But in exchange for making the tax cut available to more lower-income people, Republicans won a concession from the administration by making the family tax credit available to couples earning up to $110,000 a year.
The administration wanted it phased out for couples making $60,000 a year.
GOP sources said the airline ticket tax provisions would start out at 10 percent and drop to 7.5 percent after three years, the per-flight fee would start out at $2 and rise to $3 over three years, and the fee on international arrivals and departures would be $12.
The final bill may contain a Senate provision allowing people to use education individual retirement accounts to pay for private school through high school. "It's in there unless the president says he will veto the bill if we don't take it out," Lott said.
Early reaction to the deal was generally positive. "For us deficit hawks, this is a victory," said Rep. John Tanner, D-Tenn. House Ways and Means ranking member Charles Rangel, D-N.Y., said he had a "very positive" reaction but wants to review the deal.
House Minority Leader Gep-hardt withheld comment.
And Rep. Barney Frank, D-Mass., said that "based on what I've heard, I'm almost certain to oppose" the deal, although he predicted "a sizable chunk" of House Democrats would support it.
Archer credited the deal to "good will on both sides," adding: "We have to give credit to the president. Had he not been flexible, this never would have happened."
Julie Rovner, Lisa Caruso and Keith Koffler contributed to this story.
NEXT STORY: Congress: The Race to Recess