Clinton Concedes A Tax Cut Offer On Capital Gains Talk Is Overture To Gop In Budget Fight

The Clinton administration is discussing cutting the top capital gains tax to 20 percent and virtually eliminating the tax on the sale of homes, Republicans close to the budget talks said Thursday.

The administration plan - far less sweeping than the provisions in the vetoed Republican budget legislation - would cost roughly $9 billion over seven years and would become effective the middle of this month, said the Republicans, who spoke on condition of anonymity.

The disclosure came a day after GOP cancellation of a White House bargaining session cast doubt over future budget talks between President Clinton and Republican leaders. Both sides jockeyed for public support, expressing willingness to get the talks back on track.

“To the Republicans in Congress, let me say again, ‘My door is open,”’ Clinton said.

Senate Majority Leader Bob Dole, R-Kan., responded, “It’s nothing but a revolving door.” He said Clinton has rejected GOP offers repeatedly.

In an interview on CNN, however, Dole appeared to signal what he wants the administration to concede next. He said the administration’s capital-gains plan - raised in Oval Office discussions several weeks ago - has “some merit.” He did not describe it but called it an offer.

Many congressional Democrats - led by House Minority Leader Dick Gephardt, D-Mo. - adamantly oppose cutting capital gains taxes, describing that as a giveway to the rich.

Administration officials, citing their promise to keep budget talks with Republicans confidential, refused to describe their capital gains plan, but they did not deny the details Republicans reported.

But they stressed that the plan is just an idea and that the administration would support it only as part of an overall budget deal it found acceptable.

Treasury Secretary Robert Rubin, who outlined an administration proposal for a seven-year, $130 billion tax cut to reporters at the White House, did not mention capital gains.

But he said the administration is willing make three other concessions:

Estate-tax relief for people who inherit small family-owned businesses and farms.

An increase in the limit on the small business deduction for equipment purchases from $17,000 to $25,000.

A simplification of pension rules.

The administration also long has supported a credit for parents of children younger than 13, a deduction for college tuition and liberalized individual retirement accounts.

Dole, at a news conference, said the administration’s tuition proposal - which is not a part of the GOP plan - “sounds like a good program to me.”

An administration official, speaking on condition of anonymity, said the administration is not offering to cut estate taxes. Rather, it would allow those who inherit small family-owned businesses and farms to take up to 14 years to pay and would assess only a 4 percent interest rate on the deferral, making it, in effect, a low-interest loan.

Dole, in referring to the administration’s capital gains position in Thursday’s television interview, apparently was trying to entice the administration into firming up its offer.

Unlike the Republican bill, the administration plan would apply only to individuals, not to corporations. Also, gains would not be adjusted to account for inflation.

The cost is roughly a third of the $29 billion price tag on the GOP’s proposed capital gains cut. And the effective date is about a year later. The GOP provisions would have taken effect Jan. 1, 1995.

Currently, the capital gains rate is 28 percent for most taxpayers and 15 percent for married couples whose taxable income is less than $39,000 (using 1995 tax brackets) and single people earning less than $23,350.

The Clinton plan would cut the capital-gains rate to 20 percent for most households and to 10.5 percent for taxpayers in the bottom bracket.

The GOP bill would have cut the rate to 19.6 percent for the wealthiest taxpayers, to 18 percent, 16 percent or 14 percent for those in the middle and to 7.5 percent for the poorest.

Democrats would eliminate capital gains taxes for most homeowners. Currently, most taxpayers can defer capital gains on home sales until they reach the age of 55, when they become eligible for a tax exemption on the first $125,000 in gains.