A Taxing Question : Wealth: The affluent hold mixed opinions on plans affecting income taxes, capital gains. Some have sympathy for President Bush; others are angry.

President Bush and members of Congress are not the only Americans divided over how to write a new tax law.

The President Tuesday hinted he would accept an increase in income taxes in exchange for a cut in capital gains taxes. Later, after meeting with 16 senior Senate Republicans, he apparently switched positions, rejecting any talk of a deal.

And on Thursday confusion continued as conflicting reports circulated on whether Bush would accept a modest tax increase, tied to a capital gains decrease.

Since the proposals for income tax raises would affect those who earn $200,000 or more annually, The Times asked 10 Southern Californians in that income bracket what they would advise the President to do.

Responses varied between those who would maintain the status quo and those who would accept the compromise package offered to the President. There was sympathy for Bush’s dilemma as he seeks a way out of the bind, but there was anger as well.

“I would tell him that we’re headed toward a major recession and that raising ordinary income taxes at this time would be a mistake because . . . you are going to discourage consumer spending,” said Los Angeles attorney Richard Riordan, past president of the Los Angeles Memorial Coliseum Commission.

“And lowering capital gains taxes is a good, long-term goal but not necessary at this time.”

Peter M. Ochs, chairman and chief executive officer of the Fieldstone Co., a development firm headquartered in Newport Beach, took the opposite position.

“The big problem is our economy does not form enough capital, partly because we have one of the highest capital gains taxes in the world,” he said. “We have got to reduce that tax to encourage savings and investment to stay competitive in world terms. But I would do that only for assets held for two years.

“Painful though it is, I would accept a marginal increase in the income tax rate. That is a fair trade-off for a reduction in the capital gains tax. I would also support an increase in consumption taxes or sales taxes. . . . They encourage conservation and tax just the users.”

Gilda Marx, owner and co-chairman of the board of Gilda Marx Industries Inc., a West Los Angeles bodywear manufacturer, said she would prefer to leave the tax structure as is because most of her earnings derive from her business rather than capital gains.

If the tax rate is changed, she said, “we’re happy to pay if that is what it takes to enjoy all that we have in this country.”

Richard J. O’Neill, a prominent Orange County Democrat and owner of Santa Margarita Co., a development firm, criticized the President for allowing himself to become paralyzed over the issue.

“Of course anybody in business would want a reduced capital gains tax,” he said, “but I don’t know if that figures with the average Joe Blow, who might never in his life take advantage of capital gains taxes.

“A reduction in the capital gains will help the economy in the short run, but in the long term the U.S. Treasury loses money.

“Obviously they’ve got to raise taxes. They should have raised gasoline taxes last year. It was so obvious. Just a tax on imports would be fine. That would not hurt Bush’s friends. Now it’s too late. They are scared to do anything.”

Frank Watase, owner of the Yum Yum Donuts chain, urged the President to explain his program more clearly to the American people.

He said Bush should tell the nation that entitlement programs will be maintained without increases in benefits for one year at the same time defense spending is cut.

“In the meantime,” he said, “we need to increase some taxes until we can get our financial situation under control.”

Warren W. Valdry, a Hancock Park real estate developer, said he would urge the President to be fair, especially putting more resources into young people, whom he called “our most valuable asset.”

Peter Churm, chairman of the board of Furon, a Laguna Niguel manufacturer of plastics and industrial products, is not at all pleased with the prospects of higher taxes.

“I’d like not be taxed,” he said. “I wish Graham-Rudman had kicked in. . . . I support Bush, but I’m disgusted with all this. They are not getting anything done.

“I guess if I had to be taxed, I’d like to see a cut in capital gains, then I’d submit to an increase in the income tax rate. Why are they always hitting the people who are the most successful? I mean, I pay a lot of taxes. You ought to see my tax bill. They don’t try to sock it to some of the other groups.”

Under the deficit reduction package that was rejected by Congress last week, people making more than $200,000 would have faced a 1.7% tax increase, while those making $10,000 or less would have seen taxes raised 7.6%.

WHO: Richard Riordan, attorney, Riordan & McKinzie.

QUOTE: “Raising income taxes would be a mistake because we are having a recession and what you are going to do is discourage consumer spending. Lowering capital gains taxes is a good long-term goal but not necessary at this time.”

WHO: Fred Sands, founder and president, Fred Sands Realtors.

QUOTE: “We can’t have the government paying for everything. We can’t maintain services and not increase taxes. Let’s ask the public what services are you willing to give up and what are you willing to do without.”

WHO: John Bryson, chairman, Southern California Edison.

QUOTE: “It’s better to retain the status quo than get a capital gains tax cut and increased marginal tax rates . . . Productivity and economic health are encouraged by as simple a tax code as is reasonably possible.”

WHO: Frank Watase, chairman, Yum Yum Donuts.

QUOTE: “Priority No. 1 is to reduce the deficit. If the President is faced with accepting a tax increase to get a capital gains cut, I think he should accept it. We need to raise revenues and cut down spending.”

WHO: Gilda Marx, owner and co-chair of the board, Gilda Marx Industries Inc., a bodywear manufacturer.

QUOTE: “My preference would be to leave the tax structure as it is rather than put the emphasis on capital gains reductions. When you have a privately held company and the bulk of your income comes from that company, capital gains doesn’t enter into your earnings as heavily as direct income.”

WHO: Warren W. Valdry, real estate developer.

QUOTE: “I’m still studying the situation but equity would be my most important concern. Without equity you begin to erode what this country is about, and that’s true democracy. But our most valuable resources are our young people. We need to structure our economy so we invest more in young people.”

WHO: Humberto Luna, Spanish- language radio disc jockey.

QUOTE: “There is no reason why people should pay more taxes just because they make more. (The law) has to be fair for everyone.”

WHO: Peter Churm, chairman of the board of Furon, a Laguna Niguel manufacturer of plastics and industrial products.

QUOTE: “I’d like not to be taxed . . . . I guess if I had to be taxed, I’d like to see a cut in capital gains, then I’d submit to an increase in the income tax rate. Why are they always hitting the people who are the most successful?”

WHO: Peter M. Ochs, chairman and chief executive officer, the Fieldstone Co., a development firm headquartered in Newport Beach.

QUOTE: “Painful though it is, I would accept a marginal increase in the income tax rate. That is a fair trade-off for a reduction in the capital gains tax. I would also support an increase in consumption taxes or sales taxes. They too are painful, but they are a good thing. They encourage conservation and tax just the users.”

WHO: Richard J. O’Neill, owner, Santa Margarita Co., a development company.

QUOTE: “A reduction in the capital gains will help the economy in the short run, but in the long term the U.S. Treasury loses money. Obviously, they’ve got to raise taxes. They should have raised gasoline taxes last year. It was so obvious. Just a tax on imports would be fine. That would not hurt Bush’s friends.”