The Bush Administration will abandon its proposed capital-gains tax cut if faced with the threat of the government's defaulting on its loans, a Treasury Department official said today.
"If it were literally a choice between capital gains and default, obviously Treasury would not allow default," Undersecretary Robert R. Glauber told a House Ways and Means subcommittee.
Glauber responded only after considerable prodding by Democratic members of the oversight subcommittee. They fear that efforts by Senate Republicans to add a capital-gains cut to a bill extending the government's borrowing authority could jeopardize that bill and push the government toward default next week.
Meantime, President Bush told a news conference, "I plan to fight for my position" favoring a capital-gains tax cut. "It's something that's good for growth . . . investment . . . jobs," he said.
Capital gains are profits from the sales of investments such as real estate and securities. They are now taxed at the same rate as other income. A House-passed bill, which Bush endorses, would create a lower rate for capital gains for 2 1/4 years and then permanently adjust the tax system so that gains caused solely by inflation were not taxed.
Capital gains has become the dominant issue before Congress. Bush's push for the tax cut against opposition of Democratic leaders has blocked action on a $16-billion deficit-reduction bill, on legislation to boost aid to Poland and Hungary and on the measure raising the government's debt ceiling.