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By the end of the week, a consensus was beginning to form around a multi-year reduction in personal income taxes, perhaps even as sweeping as the "5-10-10" proposal Secretary Regan was pushing. Any deal would probably also include changes in the inheritance tax to benefit farmers, faster depreciation write-offs for business, reduction of the maximum tax on unearned income from 70% to 50%, and an increased exclusion for dividend and interest income. The Republicans agreed to alter the personal income tax cuts to give greater relief to middle-income Americans. Explained Wright: "The President, in order to protect his own image, has to have some kind of multiyear approach. We're going to have to yield on that. But we're going to insist on more help for the middle class. The Administration is going to have to yield some."
The emerging deal still faces many obstacles, and Dole and Rostenkowski will meet privately this week in the Capitol to tackle them. If a final bargain is reached, the Democrats will insist that Reagan give it unqualified public support before it is brought to a vote. Says Wright: "If Congress is going to give birth to his child, then Reagan must own up to its paternity." —By Walter Isaacson. Reported by Douglas Brew and Neil MacNeil/Washington