Mitchell Raps Proposed Tax Cut
WASHINGTON (AP) _ Senate Majority Leader George J. Mitchell today assailed a proposed capital-gains tax cut as a break for the rich that would be paid for by middle-income Americans.
In addition, he said, the cut proposed by President Bush and others would undoubtedly cause a loss of government revenue ″over any period of time beyond one year″ and thus would worsen the budget deficit.
″The present proposal is unfair, unwise,″ the Maine Democrat told reporters. It is ″effectively a tax break for the wealthy to be paid for by the middle class. It is a $31,000-a-year tax break for those whose income exceeds $200,000 a year.″
A capital-gains reduction also would unravel the big 1986 tax overhaul, Mitchell added. When the tax system was rewritten by Congress, capital gains was only one of several special tax breaks that were wiped out in order to allow a significant reduction of tax rates.
Under the new law, capital gains - profits from the sale of stock and other assets - are taxed at the same rate as wages and other income. Bush has proposed to reduce the rate to 15 percent.
Mitchell reasons that if a preference is restored for capital gains, pressure will increase to bring back other benefits that were ended in 1986.
In that regard, Sens. Alfonse D’Amato, R-N.Y., and Christopher Dodd, D- Conn., announced today they were introducing a bill to restore tax- deductible Individual Retirement Accounts for all workers, regardless of income. The 1986 law restricted deductible IRAs only to lower-paid workers and those not covered by a company pension.
In running for the presidency last year, Bush promised to seek a reduction in the capital-gains tax in order to spur investment and saving.
A majority of the House Ways and Means Committee favors a temporary cut in the capital-gains tax, which could help reduce the budget deficit in the short term by prompting investors to sell some assets they have been holding for some time.
However, many economists dispute the administration’s contention that a capital-gains cut would produce long-term revenue gains.
The Ways and Means Committee is weighing an alternative by Chairman Dan Rostenkowski, D-Ill., that would protect against taxation of gains caused solely by inflation and also provide more favorable tax treatment of long-term gains.
But Mitchell said now is not the time to even consider a capital-gains cut, chiefly because of the budget deficit.
He noted that in 1986, when tax overhaul was being debated, he offered an amendment that would have retained a special tax break for capital gains - but only as part of a plan that would include a higher tax rate on income of all kinds earned by wealthier taxpayers.
That amendment was defeated when 49 of the 53 Republican senators voted against it. Now, Mitchell said, Republicans have made a complete reversal and want a lower rate for capital gains.
The Internal Revenue Service estimates that 70 percent of the benefit of a capital-gains cut would go to those with incomes over $100,000 a year.