Democrats ready tax-cut alternative Larger reduction for middle class likely

February 14, 1992|By Los Angeles Times

WASHINGTON -- Democrats on the House Ways and Means Committee began work yesterday on an alternative tax-cut package containing a larger middle-class tax reduction than President Bush is seeking combined with a tax increase for the very rich -- a move the White House is sure to oppose.

The $90.9 billion package, outlined in a closed-door caucus by panel Chairman Dan Rostenkowski, D-Ill., would provide a $200-a-year tax credit for each taxpayer and allow first-time home buyers to use savings from individual retirement accounts to finance purchases.

It also would reduce the taxes Americans pay on capital gains -- profits from the sale of stocks or other assets -- by exempting 40 percent of such gains from taxation, to a maximum of $80,000 of gains in a person's lifetime.

To help pay for these reductions, the plan would raise taxes on the wealthy by boosting the tax rate on income exceeding $150,000 a year to 35 percent -- from an effective 32 percent now -- and by imposing a 10 percent surtax on those earning $1 million or more a year.

In a bow to growing popular resentment of the high salaries paid to some company chieftains, the plan would prohibit corporations from deducting more than the first $1 million of any executive's salary.

No vote was taken yesterday on the package, which the Democrats claim would not increase the budget deficit -- at least over the next five years. The package may be changed slightly when the group does approve it, either today or tomorrow.

But Mr. Rostenkowski said that he was "encouraged by the response" during the caucus and that he expected to produce a bill that all Democrats can support on the House floor as an alternative to the president's plan.

He predicted that Democrats would have no trouble meeting the March 20 deadline set by Mr. Bush for enacting a tax-cut plan.

The White House, which is expected to oppose the package produced by the committee, again decried the Democrats' decision to draft their own tax-cut plan.

Marlin Fitzwater, the White House press secretary, likened the panel's Democrats to "weasels going into a hole."

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