Foley Concedes Failure to Stop Capital Gains Tax Cut

House Speaker Thomas S. Foley (D-Wash.) tacitly conceded defeat Thursday in his effort to block President Bush’s drive to cut capital gains taxes.

“Any proposal for cutting taxes,” he told reporters, “even one as ill-timed and inequitable as this one, has a prospect of succeeding. . . . A proposal to reduce taxes is extremely popular.”

Foley indicated that he likes an alternative to the Bush-backed plan suggested by House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) more than the Administration’s proposal but said he has not “signed off” on the details.

The Administration has swung behind the so-called Jenkins-Archer proposal, backed by six dissident Ways and Means Committee Democrats, that would cut the capital gains rate by excluding from taxation 30% of the profits from the sale of an asset and then index future gains to account for inflation so a seller would pay taxes only on real-dollar gains.

Rostenkowski’s alternative would start indexing immediately but cut the rate only for assets bought and held for at least five years.

Richard G. Darman, director of the Office of Management and Budget, recently suggested that the Administration would like to see elements of both proposals merged, but Foley said an immediate rate cut and permanent indexing is “unacceptable to me.”

But in contrast to the strong stance he and Majority Leader Richard A. Gephardt (D-Mo.) first took when signs of Democratic revolt appeared, Foley sounded conciliatory and resigned at Thursday’s breakfast interview.

Outlining his objections to the proposed capital gains cut, Foley said it would breach the 1986 tax bill’s agreement to tax all income at the same rates and would confer special benefits on the wealthy. But he added, “I’m perfectly prepared to be convinced to the contrary.”