A proposal for a new kind of individual retirement account emerged yesterday as a significant sweetener offered by proponents of a capital gains tax cut, including the Bush administration. The new IRA was included in a bill introduced by Sens. Bob Packwood (R-Ore.) and William V. Roth Jr. (R-Del.), which apparently will be the main legislative vehicle in the Senate for a capital gains tax cut. The administration and a key Democratic advocate of capital gains tax cuts, Sen. David Boren (D-Okla.), rallied behind the bill. The bill provides supporters of a capital gains tax cut with a politically potent, double-barreled proposal. "It's not a choice of either/or between capital gains and IRAs," Roth said. "We can have both." Dubbed the "IRA Plus," the Packwood-Roth proposal would allow taxpayers to withdraw their IRA investments tax-free upon retirement, rather than taking a deduction at the time their investments are made. Packwood and Roth's IRA proposal is regarded by many economists as substantially less attractive than conventional IRAs. Backers of the bill nevertheless hope that by offering a combined tax break on capital gains and IRAs, they will neutralize the political appeal of the rival plan backed by the Senate Democratic leadership for an expansion of existing IRA benefits. The development appears to increase the chances that Congress will enact major revisions in the Tax Reform Act of 1986, which eliminated many tax breaks and lowered rates significantly. The 1986 act ended tax breaks for capital gains and sharply limited the tax benefits available for IRA investments. Packwood defended his proposal against charges that it would accelerate the unraveling of the 1986 act, of which he was a key author. He observed that President Bush had won the presidency partly on a campaign promise to cut capital gains taxes, and he said that limiting IRA deductions was one of the measures enacted in 1986 that he had had reservations about. Roth said IRAs are needed to spur saving, while capital gains tax cuts are needed to spur investment. "To borrow a simile from my home state, one without the other would be like a henhouse without a rooster," he said. "You may still get the eggs, but you're not going to keep the hens happy." The Packwood-Roth measure gained an important boost when the Bush administration, which has hung back from endorsing Republican IRA proposals, issued a statement of support, as did Boren, who had been expected to offer a Democratic capital-gains alternative. "We welcome the capital gains and IRA proposal introduced today by Sen. Packwood and Sen. Roth," Treasury Secretary Nicholas F. Brady said in a prepared statement. Boren, who has become the informal leader of the dozen or so Senate Democrats favoring a capital gains tax cut, issued a statement in which he urged "strong bipartisan support" for the bill. Packwood predicted that the bill eventually would get the 60 votes necessary to tack it on to other legislation moving through the Senate. Even if it passes the Senate, however, the bill could face substantial modifications in the House, which last month approved a temporary cut in capital gains taxes with no IRA provision. Capital gains are profits from the sale of stocks, real estate and other assets. The IRA portion of the bill was carefully designed to avoid adding to the budget deficit in the near term -- in fact, it would gain about $11 billion in revenue over five years, according to congressional tax estimates, while losing many billions more in future years. To prevent a near-term revenue loss, however, the bill offers tax advantages that many analysts believe would lack appeal for middle-income taxpayers. The proposal would exempt from tax all earnings that a taxpayer withdraws from an IRA Plus account upon retirement. Currently, those earnings are subject to tax. But IRA Plus accounts would not be eligible for the tax break that many found particularly attractive about IRAs -- the immediate deduction of a contribution. Workers could contribute up to $2,000 annually (a figure rising to $3,000 over five years) to an IRA Plus account, but they could not deduct that amount from income and thereby reap a quick cash "refund" of their investment. Under the Packwood-Roth proposal, up to 25 percent of IRA Plus funds could be withdrawn tax-free to purchase a first home, pay college education expenses of family members and pay catastrophic medical expenses. Individuals could elect to convert their existing IRAs to IRA Pluses; they would have to pay tax on their previous deductions, however. The conversions would raise revenue for the government in the near term. The capital gains portion of Packwood and Roth's bill is designed to reward long-term investors by allowing taxpayers to exclude increasing percentages of their gains from tax the longer they have held the asset in question. Five percent of the gain on an investment held for one year would not be subject to tax. The same investment held for two years would be allowed a 10 percent exclusion.