Senate Kills Bush Deficit Check-Off Plan : Taxes: Democrats denounce measure as election-year gimmick. Levies on top earners are retained in urban-aid bill.

WASHINGTON — In another campaign-season rebuff to the White House, the Senate on Friday spurned President Bush’s plan to allow taxpayers to earmark 10% of their income tax payments to reduce the national debt, forcing an equal amount of spending cuts in the process.

The measure, denounced by Democratic opponents as an election-year gimmick, was killed when Republican advocates of the check-off proposal lost a showdown vote, 58 to 36.

In another major vote on the omnibus urban aid and tax bill, a strong Senate majority brushed aside a warning that Bush would veto the measure unless two provisions affecting upper-income Americans were removed. The Senate voted, 59 to 34, to retain the provisions, which would phase out the personal exemption for families in the top 3% of income and limit their charitable and other deductions.

Senate Minority Leader Bob Dole (R-Kan.) opposed the provisions, arguing that the loss of revenue could be offset by cutting urban aid provided under the bill from $5 billion to $3 billion and by scrapping the proposed expansion of individual retirement accounts.

Dole noted that voting on the proposal clearly indicated that there were not enough supporters to provide the two-thirds vote necessary to overturn a presidential veto. He warned colleagues that Bush made it “very clear to me personally he will not sign a bill” that includes the two provisions, which amounted to “hidden tax increases” that Bush vowed to resist during his speech accepting renomination in Houston.

Although the Senate is expected to approve the bill today, it will then go to a Senate-House conference to reconcile differences between the Senate package and a smaller, House-approved measure. Both chambers of Congress would have to ratify the compromise legislation before the scheduled Oct. 5 adjournment.

The bill started as a congressional response to the riots in Los Angeles last spring but along the way it added a series of tax reductions and revenue-raising measures that now dwarf the funds earmarked for creation of “enterprise zones” aimed at revitalizing depressed inner-city areas.

The check-off plan, embraced by Bush only five weeks ago at the GOP convention in Houston, was sponsored by Sen. Robert C. Smith (R-N.H.), who argued that it would give ordinary Americans greater control over mushrooming federal spending.

“If the American people could choose, I believe 90% of them would vote for it,” said Sen. Phil Gramm (R-Tex.), a co-sponsor of the check-off amendment.

Opponents, however, contended that it could trigger deep, automatic reductions in such popular programs as Medicare, jobless benefits, veterans’ pensions and national defense.

“This is only the latest in a long series of Rube Goldberg, mechanical solutions to the deficit problem,” said Sen. Jim Sasser (D-Tenn.), chairman of the Senate Budget Committee. “It’s an election-year gimmick--a campaign ploy to garner attention.”

Smith attempted to add the check-off plan to the $30-billion tax and urban aid bill but Sasser objected that it would violate the Budget Enforcement Act since the proposal had not been approved by the Senate budget panel.

In that case, the law required Smith and his allies to get 60 votes to waive the budget act. They fell 24 votes short as opponents defeated the Bush plan by a vote of nearly two to one.

Fifty Democrats and eight Republicans voted to kill the check-off proposal while 32 Republicans and four Democrats voted to keep it alive. California’s two senators--Democrat Alan Cranston and Republican John Seymour--were absent.

In a related move, the Senate preserved the existing $1 check-off for presidential campaign funds on federal income tax returns.