Senate Apt to Be Balky on Capital Gains : Brady Hits Tax Cut Foes for Making It Rich vs. Poor Issue

Democrats said today that President Bush’s cut in capital-gains taxes is no sure bet in the Senate, while his Treasury secretary criticized opponents for discussing the issue in terms of rich against poor.

“I think there is a reasonably good chance we’ll be able to prevail here” and defeat the reduction, Senate Majority Leader George J. Mitchell (D-Me.) told reporters.

Sen. Bill Bradley (D-N.J.), a member of the Finance Committee, said he thinks the deficit-reduction plan to be written by the panel next week will not include the capital-gains cut, which the House approved on Thursday.

Instead of the capital-gains cut, Bradley said the Finance Committee is likely to approve a measure making tax-deductible Individual Retirement Accounts available to more workers as an incentive for saving.

At a Finance Committee hearing on IRAs, Treasury Secretary Nicholas F. Brady defended the capital-gains reduction as an important tool for economic growth. He said there is no certainty that IRAs increase savings, and called the proposal too expensive when the budget deficit exceeds $100 billion.

Brady complained that 80% of the tax saving under the expanded IRA proposed by Bentsen would go to those with incomes over $50,000 a year.

Democrats’ Argument Told

Democrats’ major argument against the capital-gains cut is that 80% of its benefits would be collected by those with incomes above $100,000.

“It is hard for me to understand why this whole discussion has to reach the level of rich vs. poor,” Brady said.

“The rich are getting richer in this country and the poor are getting poorer,” said Sen. Thomas A. Daschle (D-S.D.). “You’ll have to forgive us for bringing it up.”

Brady contends the figure cited by Democrats on capital gains is misleading on the ground that the over-$100,000 category includes many people of relatively modest earnings who, once in a lifetime, sell a small business or a home and for that year their income is pushed above that level.

Capital gains, which are profits from the sale of investments, are taxed at the same rate as wages. Bush and a majority of the House want to tax only 70% of gains.

The secretary cited an estimate that 47% of capital gains are realized by people whose other income--not including the gains--is less than $50,000 a year.

Bentsen Responds

In response, Sen. Lloyd Bentsen (D-Tex.) said the joint-committee staff, which provides technical tax advice to Congress, found that only 18% of the gains were taken by people who reported more than one capital-gains transaction a year--eliminating the one-time sellers.

The Finance Committee will begin work next week on a package of spending cuts and revenue increases aimed mainly at reducing the deficit by about $17 billion during budget year 1990, which begins Oct. 1.