To Tax or Not to Tax : Bush Offers a Deal That He Can’t Get

The White House said today President Bush would accept higher taxes on the wealthiest Americans in exchange for a deep cut in capital gains rates--but he doubts that such an accord can be reached.

It said he prefers a deficit-cutting agreement that omits both elements.

The White House statement--coming less than an hour after GOP leaders told reporters they thought a deal was at hand--served to increase the confusion that has swirled around the tax issue in recent days.

Caught in another day of budget confusion, Bush said he would not pursue the tax trade in negotiations with the House and Senate over a package of spending cuts and tax increases totaling $500 billion over five years.

“I think it’s a waste of time because I just don’t think it can get through both houses of Congress,” Bush said of the proposal.

There was no immediate reaction from congressional Democrats.

The developments appeared likely to complicate efforts to draft the budget accord before Oct. 19, when the government faces the prospect of a shutdown in non-essential services.

“We have been willing to explore a compromise if it were balanced and fair,” Bush was quoted by the White House as telling Republican leaders.

The White House announcement was yet another attempt to clarify Bush’s position, which appears to have changed several times in recent days, bringing him under strong criticism.

According to a statement issued by White House spokesman Marlin Fitzwater, Bush was willing to raise the top tax rate to 31% from the current 28% level if the capital-gains tax was reduced to 15%. At present capital gains investment profits are treated as income for tax purposes.

“I do not believe such a compromise is now possible,” Bush was quoted as telling House Republican leaders who met with him to assess strategy for reaching an accord on a budget package.

“Indeed, I’m quite concerned that pursuing it in the current context may not only fail, it may legitimize something farther to the left that we cannot accept,” Bush said.

Bush said he “will not tolerate ‘bursting the bubble” by raising the tax rate to 33%. “I believe that would mean far more than just taxing the rich,” he said. “It would start us back on the path toward higher income tax rates for everyone.”

The release of quotes by Bush was a highly unusual move by the White House, reflecting the extent of concerns over the President’s position.

Fitzwater offered a candid explanation for the confusion of the past two days. “One of the phenomenons of group meetings (between the President and lawmakers) is people hear what they want to hear.”

Bush first expressed his willingness to accept a compromise on the tax issue at a news conference Tuesday, but appeared to reverse his position after a later meeting with Republican Senate leaders.

The White House appeared to change its position again Wednesday when Bush said he would leave it to Congress to decide what to do.

The President is to hold further meetings with Republicans on the budget package.