Trying to regain his political footing after a series of missteps, House Speaker Newt Gingrich is reaching for a tried-and-true Republican strategy–tax cuts.
In public appearances this week, the Georgia Republican repeatedly emphasized his commitment to tax reduction, once again propelling the issue to prominence as congressional Republicans and Clinton administration officials resume talks on a balanced budget plan after a two-week break.
Gingrich said his goal is to eliminate capital gains and estate taxes, but Senate Majority Leader Trent Lott (R-Miss.) expressed doubt Thursday that those taxes could be wiped out soon.
“I personally don’t think we should have taxes in either of those areas,” Lott said. “But I don’t think you can get those done this year.”
Republican aides emphasized that Gingrich was simply speaking of broad Republican goals. To many observers, the speaker’s backing for “zero” capital gains and estate taxes is an attempt to repair the damage of his statement last month that tax cuts should not become a stumbling block to a budget agreement with the president.
For Gingrich, the tax-cut furor was the latest blow to his standing in the party.
In 1995, his poll numbers sank after he shut down the government during a budget standoff with Clinton. Then in January, his re-election as speaker was jeopardized by an ethics controversy that included his admission that he violated House rules by using tax-exempt organizations to help fund his political empire.
If there is any silver lining for conservatives in the latest Gingrich situation, it’s that the tax-cut issue is timely, with the April 15 filing deadline imminent.
On that day, the House will vote on a GOP bill to make it a criminal offense for IRS employees to browse through taxpayers’ returns. It will also consider a constitutional amendment that would allow tax increases only if two-thirds of each house of Congress approves.
Republican leaders hope all the tax-cut talk will help them in budget negotiations with the White House, which generally favors smaller reductions in taxes.
Under current law, the first $600,000 of a person’s estate can pass to heirs untaxed, while the rest is taxed at rates from 18 to 55 percent. For capital gains–which are the profits from sales of assets–the top tax rate is 28 percent.
Estate taxes will bring the government $100 billion over five years, the Congressional Budget Office has estimated. Capital gains taxes will add an additional $250 billion over five years.
With so much money at stake, is it realistic to expect any tax relief at all in those areas?
Rep. Jerry Weller (R-Ill.), a member of the tax-writing Ways and Means Committee, thinks so. He said a reasonable goal for capital gains and estate tax relief can be found in the balanced-budget plan Republicans passed two years ago, which Clinton vetoed.
That plan would have lowered the top capital gains rate to 19.2 percent and doubled the estate-tax exemption to $1.2 million.
“We demonstrated you can produce a balanced budget while providing tax relief,” Weller said of the GOP’s 1995 budget proposal.
Other analysts said Gingrich’s talk of eliminating estate and capital gains taxes is good politics, even if it is not realistic.
“In terms of the politics of it, you have millions of Americans who’d like to pass on their farms or small businesses” without having to pay estate taxes, said Daniel Mitchell, a senior fellow at the Heritage Foundation, a leading conservative think tank.
On capital gains, Mitchell said, “You have millions and millions of Americans who have a little stock, and all of a sudden they discover if they sell it, the government’s going to confiscate 28 percent?”
Congressional Democrats support a limited reduction in estate taxes, so family farms and small businesses can be passed to children.
“What doesn’t make sense is saying we are going to eliminate the estate tax, we are going to eliminate all and any capital gains taxes. The vast portion of that tax relief goes to families who earn over $100,000 a year,” House Minority Leader
Richard Gephardt (D-Mo.) said Thursday.
“This is incredible to me that we could be supporting policies to help the wealthiest families tremendously,” Gephardt said.
But Michele Davis, a spokesman for House Majority Leader Dick Armey (R-Texas), a leading anti-tax advocate in Congress, said the speaker’s proposal to eliminate those taxes is primarily a bargaining tool for the budget negotiations.
“It would be nice to end up somewhere in the middle,” Davis said.
