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Little Room for Agreement at Tax Hearing : Congress: Many Democrats say they could support a capital gains levy cut backed by GOP, but in a limited form. Partisan clashes continue.

TIMES STAFF WRITER

The House Ways and Means Committee heard clashing testimony Friday from Democratic and Republican leaders over how to cut taxes next year to get the faltering economy moving again.

Their sharp differences underscored the variety of approaches to tax legislation that are emerging as Congress considers ways to promote growth and create jobs while awaiting President Bush’s recommendations, expected in late January.

Despite the sharp exchanges across party lines, many Democrats said they could support a capital gains tax cut, which Republicans are calling for, but one that would be narrowly limited to encourage long-term investments.

Along these lines, Rep. Robert T. Matsui (D-Sacramento) and Rep. Jim Moody (D-Wis.), for example, proposed a cut in capital gains taxes for investors in small, start-up companies if their stock was held for more than five years.

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But most of the emphasis Friday was on the differing approaches taken by each party.

House Majority Leader Richard A. Gephardt (D-Mo.), speaking for the Democratic leadership, placed top priority on a tax cut for middle-income Americans to be paid for by raising taxes on the very rich.

“We’ve got to use this package as a way of getting money in the hands of working Americans,” Gephardt said. "(It) may well have a stimulative effect.”

Advancing the views of House Republicans, Minority Whip Newt Gingrich (R-Ga.) put strong emphasis on a reduction in capital gains taxes and other incentives for investment that he said would have a strong job-creating impact.

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Gingrich, echoing the views of Bush’s top economic advisers, opposed any increase in taxes on upper-income groups.

“There is virtual unanimity among economists that tax increases during a recession will kill jobs, so there should be no tax increases, either direct or disguised, in an economic growth package,” the GOP lawmaker said.

“This is not the time to engage in class warfare, ideological revenge or demagoguery,” Gingrich added, obviously referring to Democratic proposals to pay for lower-income tax cuts by raising taxes on wealthy individuals.

He said any tax-cut package must not increase the federal budget deficit or drive up interest rates, or else “Congress will end up killing jobs and deepening the recession.”

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Despite the partisan overtones at the hearing, President Bush telephoned Rep. Dan Rostenkowski (D-Ill.), chairman of the Ways and Means panel, to praise him for calling the sessions to hear Administration witnesses.

In his testimony, Gephardt said he agreed with Bush’s call for putting aside political differences and working together to get the economy back on track.

“But the President must understand this: Halfway measures designed to get him past the next election simply won’t cut it,” Gephardt said.

“If the two political parties are to establish a new contract of cooperation for getting America back on track economically, the plan has to be bold, comprehensive and long term,” he added.

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Dozens of other proposals were advocated by a total of 28 members of the House and Senate as the Ways and Means panel concluded its first two days of hearings.


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