In an effort to rally liberal opposition against a proposed reduction in capital gains taxes, the AFL-CIO yesterday urged Congress to scrap the controversial proposal, as well as any White House tax cuts, in favor of a $150 tax credit for everyone.
AFL-CIO President George Meany, in a letter to the House Ways and Means Committee, said the tax credit proposal, which would cut taxes by an estimated $15 billion, would give the greatest amount of relief to low and middle-income taxpayers who have been hardest hit by the latest surge in inflation.
Labor federation officials admitted the proposal had little chance of passing, but said they hoped it might serve as a catalyst for liberal opposition against separate proposals by Reps. William Steiger (R-Wis.) and James Jones (D-Okla.) to reduce the capital gains tax rate as part of a broader tax cut package.
'Everything there is such a bizarre mess, anything can happen," an AFL-CIO official said of the committee. "Things are in a shambles."
The committee is scheduled to return to the tax cut legislation Thursday.
A bare majority of the members are expected to vote for the proposal by Jones, which would reduce the capital gains tax rate from 49 to 35 percent. The proposal would be integrated with President Carter's proposal for a $15 billion tax cut for business and individuals. It has been offered as an alternative to Steiger's proposed 29 percent rate. Ways and Means Chairman Al Ullman (D-Ore.) and Rep. Barber B. Conable Jr. (N.Y.), ranking Republican on the committee, are expected to join Jones today as co-sponsors.
Carter has threatened to veto both the Jones and Steiger proposals, but Treasury Department tax officials, under pressure to provide some sort of capital gains relief, were working yesterday on a plan that would reduce the 49 percent capital gains rate only to 39 percent.
One person familiar with the administration plan said, however, that department officials had received no word from either Treasury Secretary W. Michael Blumenthal or the White House on the precise shape of any compromise.
Blumenthal and the president were in Germany during the weekend attending the seven-nation economic summit. Blumenthal is scheduled to meet with his tax officials today.
Meany, in his letter, said the capital gains proposals "make a mockery of the need for tax justice and heighten taxpayer resentment." Therefore, "I urge you to support enactment of a fair and responsible individual income tax cut, accomplished by simply increasing the existing ($35 per person general tax credit to $150."
The AFL-CIO plan is similiar in size to the latest White House proposal. Unlike the White House plan, however, all the tax cuts proposed by labor would go to individuals, none to business.
Meany told committee members that unless some action is taken this year, individual taxes will increase $16.4 billion. He said $9 billion in previously enacted tax cuts, including the $35 credit, will expire Dec. 31 and Social Security taxes will increase by $7.4 billion.
AFL-CIO officials said they discussed their proposal with the administration, but received no support. "Their reaction was that it was 'very nice' but they didn't think it would 'fly,'" an official said.
Ways and Means officials said the labor proposal comes much too late to affect the tax bill. "Our course is set," a source close to Ullman said. "There are eight or nine liberals on the committee and there are 10 or 11 proposals among them and that's the problem."
A spokesman for Ullman predicted a variation of the Jones proposal would be approved by the committee after "a rocky three or four days."