Mitchell Sees Defeat of House’s Capital Gains Tax Plan

Senate Majority Leader George J. Mitchell (D-Me.) said Sunday that he has the votes to defeat the House-passed version of President Bush’s capital gains tax cut, a measure he likened to crack cocaine.

“It is so bad, so wrong for the economy,” he said. “It will do for the deficit what crack does for the user: a quick short high followed by a long, painful depression.”

However, Mitchell, interviewed on NBC-TV’s “Meet the Press,” acknowledged that a revised version might have enough support to win narrow approval because Bush’s “irresponsible position . . . makes it extremely difficult to prevent any tax cut from occurring.”

Details of Proposal

The measure would reduce from 33% to 19.6% the maximum tax rate on profits from the sale of stocks and other investments until 1992. The rate then would climb back to 28% with assets indexed so that any gains attributed to inflation after that point would not be taxed.

Its attractiveness to lawmakers stems from predictions by economists that a sell-off by investors rushing to cash in on the low-rate window would generate $9.4 billion in additional tax revenue over the next three years.

After then, however, the revenues would fall dramatically and actually worsen the deficit by a total of $21 billion over the following five years, according to Congress’ Joint Committee on Taxation.

While saying he personally opposes any cut in capital gains taxes now, Mitchell acknowledged that many members of his party favor enacting a differential that would tax capital gains at a lower rate than wages, interest or dividend income.

“Whether or not they will coalesce behind any plan along with Republicans, I don’t know,” he said. “It will be very close on some other plan.”

A majority of Senate Democrats have united behind an alternative plan proposed by Sen. Lloyd Bentsen (D-Tex.) to restore up to $1,000 a year of tax deductibility for contributions to individual retirement accounts. IRA deductibility ended in 1987 under the loophole-closing tax law a year earlier that also raised the rate on capital gains.

Mitchell said Senate Democrats will not link their IRA proposal to a tax increase on families that earn more than $145,000 yearly, as the House tried, but rather will propose to make up revenue lost to expanded IRA deductions by extending telephone and other excise taxes that were due to expire at the end of this year.

Medicare Vote Due

Meanwhile, House Speaker Thomas S. Foley (D-Wash.) predicted on the same program that the House probably will vote this week to repeal Medicare coverage of catastrophic health problems.

Many beneficiaries, especially the wealthier among them, have balked at having to pay premiums this year of up to $800 to help cover medical expenses for retirees of more modest means.

“I hope personally that the program is retained on a modified form,” Foley said. “But . . . there are a great number of Republicans and some Democrats in the House who are in favor of repeal.”