President Bush showed rare political class when he abandoned his campaign for a cut in the capital gains tax, something he wanted very much, in order to keep the federal government solvent, something everybody else wanted very much.
At present, the tax is imposed on profits from the sale of stock, homes and other assets at the same rate as ordinary income. Bush originally wanted to cut it by about half. But as we see it, he did not lose much by deciding to wait until next year. The capital gains bill had been politicized to the point where it would have amounted to nothing more than a two-year tax amnesty for wealthy Americans. It needed work, and Bush’s move makes time for more careful study of the tax cut as a way to encourage productive investment.
Bush made it clear that he still hopes to get the reduction he promised during last year’s campaign, but it seems clear he did not think that getting it this year was important enough to prolong a fight over the tax that has stopped every important piece of legislation in its tracks.
One of the stalled bills alone made it worth Bush’s while to call off the fight. It raises the ceiling on the national debt. If it does not clear Congress by next week, the federal government would have to start defaulting on loans.
The move also frees Bush to concentrate on lashing the Democratic leadership in both the House and Senate to produce budgets that meet the targets set by the Gramm-Rudman act for reducing the federal deficit. He may not get his tax cut this year, but the the move is bound to lead to a capital gain of his own.