P.M. BRIEFING : Proposed Cut in Capital Gains Tax Defended by Bush Administration

The Bush Administration today defended its proposed capital gains tax cut as an important tool for economic growth, but key senators questioned whether it would feed an impression that the tax laws are unfair.

Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee and a longtime backer of a lower capital gains tax, offered another reason for skepticism. “There is a very real danger that the President’s proposal would work against our long-term effort” to reduce the federal deficit, he said.

Dennis E. Ross, acting assistant secretary of the Treasury for tax policy, told the committee that cutting the top capital gains tax rate from 33% to 15% would provide an important incentive for long-term savings and investment. But Sen. Bob Packwood (R-Ore.) told Ross: “Your capital gains proposal is a step away from the perceived fairness (of the tax system) by the $18,000-a-year sawmill worker.”