White House Offers Concessions to Get Tax Cut : Compromise: Bush is willing to hike the base wage in exchange for a lower capital gains levy.

The White House, stymied by a shortage of votes in the Senate for President Bush’s proposed capital gains tax cut, signaled a possible retreat Wednesday and encouraged Democrats to propose compromises.

White House Chief of Staff John H. Sununu, in a meeting between Bush and a group of Democratic senators, went so far as to suggest that a compromise could include an increase in the minimum wage in return for a capital gains tax cut, according to one participant.

Deputy White House Press Secretary Alixe Glenn, reflecting the difficulty that Bush has encountered in lining up enough support to obtain Senate approval of the tax cut, openly acknowledged a White House readiness to make a deal.

“We think there may be room for compromise to get a package,” she said.

A reduction in the tax on capital gains--profits from sales of stocks, bonds, real estate and other assets--has become a central element in Bush’s economic program during his first year in office.

The House has approved a two-year reduction in the maximum capital gains tax rate to 19.6% from 33%. But Bush has been unable to line up the 60 votes needed to cut off Senate debate on the issue, a necessary step before the Senate can vote on the actual tax cut, which would require a simple majority for approval.

Senate supporters of a proposal to combine a capital gains tax cut with a new form of individual retirement account attempted Wednesday night to attach the plan as an amendment to a bill containing aid for Poland and Hungary.

Senate Majority Leader George J. Mitchell (D-Me.) challenged the proposal’s sponsor, Sen. Bob Packwood (R-Ore.), to call a vote today to determine if supporters could get the 60 votes needed on a cloture motion to cut off debate.

“I can assure you that, on whatever bill, whatever day, whatever month (the capital gains issue is raised), it will (result in) a cloture vote,” Mitchell said.

Packwood responded that supporters had at least 55 votes in favor of a capital gains tax cut and would insist on voting three or four times if they could not reach the required 60 votes initially.

Participants in Wednesday’s meeting with Bush made it clear that, without some sort of compromise in which passage of the tax cut would be contingent on the Administration’s backing down on the minimum wage or some other issue, there is little chance that the cut would be approved this year. And, even with a compromise, resolution is not likely until next year.

“There won’t be any straight capital gains tax bill,” said Sen. Tom Harkin (D-Iowa), one of the senators who met with Bush. “There will be some kind of package, and it’s going to take time to get the package together. And that’s why I believe it’s going to be sometime early next year. If the Administration continues to push for an up-and-down vote on capital gains to the exclusion of everything else, that’s just not going to happen.”

The fact that the White House would consider compromising on the minimum wage issue indicated the length to which it is ready to go to obtain approval of the capital gains tax cut, as well as the difficulty of the task.

On June 13, Bush exercised his first presidential veto by rejecting legislation that would have raised the minimum wage from the current $3.35 an hour to $4.55 an hour. The President had refused to budge from his final offer: an increase to $4.25 an hour by Jan. 1, 1992, and a six-month “training wage” of $3.35 an hour for newly hired workers.

At Wednesday’s meeting, Harkin reportedly suggested “some accommodation” on the part of the Administration on the minimum wage issue and “Sununu liked the idea.”

The person who reported that, speaking on condition of anonymity, said that one proposal under discussion would revive the $4.25 offer that congressional Democrats had rejected last spring and couple it with a training wage for a period shorter than the six months that Bush had recommended.

A senior White House official, also speaking privately, said that Sununu “is willing to listen” if Harkin returns with a minimum wage proposal. “He was serious,” the official said. But he said the chief of staff had no specific proposals in mind.

“Write it down, write it down,” Sununu said, sliding a pad across the table to Harkin, the senator recalled, to encourage him and the other Democrats, all of whom had supported some form of capital gains tax cut in the past, to propose specific areas for compromise.

Harkin and the other Democrats are thought to be likely candidates to arrange a compromise between Bush and Democrats who are opposed to the tax reduction.

Bush has argued that the cut would stimulate investment, and thus produce greater returns for the government. Opponents have said that it would favor wealthier taxpayers, who are able to make investments, and do little for the economy.