Treasury Secretary W. Michael Blumenthal is prepared to recommend that President Carter accept a small reduction in capital gains taxes to win congressional committee support for his general tax cut proposal, administration officials said yesterday.
Blumenthal raised that possibility yesterday in remarks to the Los Angeles County Board of Supervisors, saying he would support smaller cuts in capital gains taxes than those now being considered by the House Ways and Means Committee.
He said he would confine the additional tax breaks to homeowners who realize unusual profits by selling their homes and to "a modest program focusing on the need for venture capital and other investment" in high-risk business areas where there is a need for economic stimulus.
Carter, in a nationally televised news conference last week, denounced two proposals being considered by Congress that would cut capital gains taxes by as much as half. He characterized one of the proposals, sponsored by Rep. William Steiger (R-Wis.), as offering "huge tax windfalls for millionaires and two bits for the [TEXT OMITTED FROM SOURCE]
Confirming Blumenthal's current thinking on the subject, an administration official said the possibility of accepting a small capital gains tax reduction was a recognition of the realities on Capitol Hill.
"We all recognize that the Steiger amendment has gained a lot of momentum," he said. "To get out tax cut through the committee, we may have to give up something . . . We may have to swallow a small capital gains reduction in those two areas."
Under this strategy, the official said, if it appears that Congress will not enact the administration's tax cuts without a reduction in capital gains taxes, Blumenthal would offer the more modest program as an alternative to the Steiger amendment and another capital gains proposal sponsored by Rep. James R. Jones (D-Okla.).
Capital gains are the profits from the sale of assets such as stock or property.The Steiger amendment would cut the maximum tax on capital gains from 49 percent to 25 percent. The Jones proposal would cut the maximum tax to 35 per cent.
The official said Blumenthal has not made a recommendation to the president and that it is unclear how Carter would react. But if the situation in Congress does not improve, he added, "I suspect we (the administration) would do it."
In his remarks in Los Angeles, Blumenthal critized the Steiger and Jones proposals as inflationary, but provided no details of the smaller cuts he is considering. Officials in Washington said there have been no final decisions on what to propose to the president.
Carter originally asked Congress for a $25 billion tax cut and a number of tax "reforms." The size of the tax cut has already been scaled back to $20 billion, and may drop to $15 billion, while most of the "reform" proposal have been given up for dead this year.
An administration official, conceding that there is no hope for the "reform" portions of the administration plan, said Blumenthal will check further on congressional sentiment next week before making any recommendation to the president.
"We are trying to figure out how much we have to give to get the tax cut through," he said.