Lowering Capital Gains Tax

Congress, at the behest of President Bush, is ready to jump through the hoop again, implies The Times of Aug. 31, to do a favor for the rich, this time with a capital gains tax cut.

Like Ronald Reagan’s handout in 1980, which saddled us with a permanent $150 billion annual increase in the national debt, the Bush move is speculative, based on an expected wave of stock selling to take advantage of the lowered tax rate, which would cause a temporary increase in federal revenue despite this lowered rate.

That could happen and the buyers could respond as hoped for, provided they are convinced the tax cut will still be in effect when their turn comes to sell. Or the buyers could hold out for a lower price. If so, then gone is the profit and gone is the increased government revenue.

Bush seems to think this latter outcome will be averted by the current wave of leveraged buyouts, with raiders offering fantastic prices for the stock of the companies they seek to control. However, as Merv Griffin discovered in his “victory” over Donald Trump, the investment may not be as profitable as he thought it would be.

If such facts of life lead to an epidemic of common sense, we could have another stock market crash, with huge capital losses instead of capital gains and lowered rather than increased tax receipts. However, that doesn’t seem to worry our sloganeering President. For him the gamble is a winner if (1) the Bush Administration (with the compliant Congress) gets the credit for any increased revenue resulting from the leveraged buyout war and (2) the wealthy class of our society, that supplies the funding for both political parties and their campaigns, gets another tax break--at our expense, of course.

DON I. HEAD

Los Angeles