DATE: Saturday, June 28, 1997               TAG: 9706280320

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: FROM WIRE REPORTS 

DATELINE: WASHINGTON                        LENGTH:   85 lines

SENATE OKS A MIDDLE-GROUND TAX-CUT PLAN FORGING A UNIFIED BILL WITH THE HOUSE IS THE NEXT STEP.

The Senate passed its big tax-cut plan Friday, setting the stage for high-stakes negotiations with the House and President Clinton to produce cuts for parents, college students, investors and millions of other Americans.

By a vote of 80-18, the Senate approved its blueprint to reduce taxes by a net total of $76.8 billion over five years. It followed the House vote Thursday approving a similar plan to cut taxes by about $85 billion.

Because the two plans differ in their details, the Senate and House must negotiate a compromise to send to Clinton. On Monday, he is expected to outline what he wants in the final bill.

In many respects, the Senate bill represents a sort of halfway point between the House and Clinton.

Most notably, it would be less generous to wealthier Americans than the House bill, and not as generous to working-class Americans as Clinton would like.

Clinton said Friday he was ``quite optimistic'' about reaching an acceptable agreement, and was not discouraged by wrangling over the size and shape of the proposed tax cuts. ``We should expect a little of this skirmishing,'' he told reporters at the White House.

Even as they looked ahead to long and perhaps contentious bargaining, Republicans and Democrats worked together in the Senate much more closely than they did in the House. In the end, 29 Democrats joined 51 Republicans in approving the Senate plan.

Only four Republicans, including Sens. Jesse Helms and Lauch Faircloth of North Carolina, opposed the tax-cut proposal.

``This is truly a celebration of a bipartisan effort to provide tax relief to every taxpayer at every stage of life,'' said Senate Majority Leader Trent Lott, R-Miss.

House Speaker Newt Gingrich, R-Ga., predicted the Senate and House will reach an agreement with Clinton that will result in the first major tax cuts since 1981.

``When we're done negotiating, the heart of our tax package that we ran on in . . . 1994 is going to be signed into law by President Clinton,'' Gingrich said in a taping of the CNN's ``Evans & Novak'' program to be broadcast today.

Gingrich acknowledged that the House bill is likely to change significantly, but said he was confident the final plan would include all its major elements.

Like the House tax package, the Senate plan would provide $500-per-child tax credits for children under 17, a tax credit for 50 percent of college costs up to $3,000, a cut in the tax rate on most investment profits to 20 percent from 28 percent, expanded Individual Retirement Accounts, and an increase in the size of estates exempt from taxation to $1 million from $600,000.

The child and college tax credits would take effect in 1998 for the 1997 tax year. The expanded IRA provision would take effect next year. Cuts in the investment profits tax would be retroactive to May 7 of this year. And estate tax relief would be phased in between 1998 and 2006.

The Senate plan differs from the House on several key points. Among them:

The Senate would provide the family tax credit to parents of children aged 13-16 only if they deposit the money in a college fund. The House would give the credit with no strings attached;

It would raise federal cigarette taxes by 20 cents a pack and use the money to finance health care for uninsured children and to ease proposed tax increases on air travelers. House tax writers rejected any increase in cigarette taxes;

Like the House, it would cut the tax rate on capital gains from investments. But it would not index capital gains to inflation like the House, a move that would allow investors to escape taxation on any gains due to inflation.

The Senate Friday defeated a proposal by Sen. Edward M. Kennedy, D-Mass., to boost the cigarette tax by an additional 23 cents. The vote was 70-30 against Kennedy, but he picked up support from Clinton and promised to seek the bigger tax increase during negotiations of the House-Senate conference committee. MEMO: This story was compiled from reports by Knight-Ridder News Service

and The Associated Press. ILLUSTRATION: HOW THEY VOTED

A ``yes'' vote is a vote for the bill.

John W. Warner, R-Va. Yes

Charles S. Robb, D-Va. No

Jesse A. Helms, R-N.C. No

Lauch Faircloth, R-N.C. No

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