Gephardt Backs Cutting Middle Class Tax Burden : Economy: House Democratic leader wants those with incomes above $100,000 to pay more. Shift in rates would spur a recovery, he says.

Providing a tax cut to middle-income Americans while increasing taxes paid by the wealthy will receive “highest priority” in the House to spur economic recovery and increase fairness, House Majority Leader Richard A. Gephardt (D-Mo.) said Tuesday.

A suitable plan would raise taxes on those with incomes above $100,000 and reduce taxes for those with family incomes of $75,000 or less, Gephardt said. Under last year’s budget agreement, any new government expense, including a tax cut, must be offset by new revenue.

Gephardt made his views known as Democratic congressional leaders prepared to discuss an anti-recession and economic growth program on Thursday that will include a “quick pay-out” highway construction program and a 13-week extension of unemployment benefits.

“We’re clearly in a recession,” Gephardt told reporters. “I see no uptick anywhere. . . . We’ve got to break this thing loose.”

While he offered no details on tax reduction, Gephardt practically endorsed a bill by Sen. Albert Gore Jr. (D-Tenn.) and Rep. Thomas J. Downey (D-N.Y.) that would provide an $800 tax credit for every child under 18 while lifting taxes sharply on Americans with incomes above $100,000.

“A very positive approach,” Gephardt said. “There are infinite ways to do it but I’d be very happy with that.”

While such a measure might pass the Democratic-controlled Congress, it would face an almost certain veto by President Bush because it would replace the current top income tax rate of 31% with new rates of 32% and 35%.

Many Democrats believe that shifting the tax burden is justified because the share of federal taxes paid by the wealthy has declined over the last decade, while the portion paid by low- and middle-income Americans has increased. The Administration and many Republicans, however, oppose any form of tax increase.

Rep. Dan Rostenkowski (D-Ill.), chairman of the tax-writing House Ways and Means Committee, has opposed consideration of any major tax bill this year but he might be persuaded by the House Democratic leadership to change his mind.

“We’re in a wait-and-see position,” said a source close to Rostenkowski.

Bush has recommended a cut in the income tax on capital gains from the existing 28% rate to 15% but the proposal has encountered strong opposition from Democrats on grounds that its benefits would go primarily to those making $200,000 a year or more.

Capital gains are profits from the sale of stocks, bonds, real estate and other assets. The President has argued that a capital gains tax reduction would stimulate investment, increase economic growth and create additional jobs.

Gephardt, with the aid of some other senior Democrats in the House, apparently is attempting to seize the initiative on the tax issue in hopes of unifying members of his party behind an economic recovery agenda.

Gephardt also said Congress should extend the maximum benefits provided by unemployment compensation by 13 weeks because many jobless workers have exhausted their benefits after receiving the current maximum of 26 weeks. It would be necessary to raise taxes on business to pay for the benefit extension and other changes, he said, but the increases would not have to take effect until 1993.