Lott Likes Gingrich Tax Ideas, but . . .

A day after House Speaker Newt Gingrich (R-Ga.) called for abolishing all capital gains and estate taxes, another top Republican leader endorsed the idea Thursday but said it is unlikely to happen soon.

“I personally don’t think we should have taxes in either of those areas,” Senate Majority Leader Trent Lott (R-Miss.) told reporters. “And I’ll always be looking for an opportunity to vote to eliminate them. But I don’t think we can get that all done in one year.”

Democrats responded to Gingrich, who on Wednesday said he favors a zero tax on capital gains and inheritances, by decrying his proposal as a budget-busting sop to the rich.

“If Speaker Gingrich had his way, taxes on the rich would be slashed and everyone else would be paying for it,” said House Minority Leader Richard A. Gephardt (D-Mo.). “At a time when we’re trying to balance the budget, the last thing we need to do is dig a deeper hole.”

The public sparring came as representatives of the Clinton administration, the House and the Senate met privately to discuss their differences on tax policy for the coming fiscal year. The subject came up in the third straight day of bipartisan negotiations over ways to balance the federal budget by 2002. Republicans have said that if those talks do not bear fruit by next week, they may give up on trying to forge a compromise with the administration and draft their own budget without the president’s support.

Gingrich threw a rhetorical bombshell into the middle of those budget talks Wednesday when he proposed eliminating estate and capital gains taxes. Gingrich’s spokeswoman said, however, that the idea was floated not as a negotiating position in the current budget talks but as an indication of where Republicans should head in a broad, future debate about overhauling the tax code.

By throwing cold water on the immediate prospects for such a change, Lott acknowledged the stark fiscal reality: Gingrich’s proposals would produce a huge drain on federal revenues and make it vastly more difficult to eliminate the budget deficit.

According to Treasury Department estimates, elimination of capital gains and estate taxes would cut revenues by $300 billion over five years.

Although Lott was pessimistic that those taxes could be eliminated this year, he said he is hopeful that they could be cut. He has introduced a bill that would raise to $1 million the amount of estate assets exempt from that tax. The tax now applies only to assets of more than $600,000. Because of that limit, only about 1.4% of all estates are subject to the tax.

According to a Democratic analysis, more than half the benefits of eliminating the estate tax would go to some 1,700 taxpayers a year.