House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) spoke out yesterday against any large cuts in the capital gains tax and suggested that the caucus of all House Democrats might be mustered in support of a more acceptable tax plan.
At his daily news briefing, O'Neill said "we can write a far more democratic bill" than the legislation now taking shape in the House Ways and Means Committee.
There, Chairman Al Ullman (D-Ore.) has joined Rep. James R. Jones (D-Okla.), a relatively junior member of the committee, in sponsoring a so-called "compromise" that would reduce the maximum tax rate on capital gains from 49 percent to 35 percent.
This would supplant a more sweeping $2.2 billion capital gains cut proposed by a Republican, Rep. William Steiger (Wis.), that would limit the maximum tax rate on all capital gains to 25 percent President Carter has assailed the GOP proposal as aiding "almost exclusively the very wealthy."
Advocates of a substantial capital gains tax cut say it would spur stock market investment and provide relief for some property owners, but acknoledge that most of the immediate benefits would go to wealthier taxpayers.
"I think it goes too far as far as capital gains is concerned," O'Neill said.
Even so, he said there appeared to be enough votes on 37-member Ways and Means to report out the Ullman-Jones bill. He conceded that it has generated subtantial support, especially in light of White House preoccupation with other issues.
"The White House was so involved with the Panama Canal treaty this thing just slipped away from them," O'Neill told reporters. "A lot of people in my party made different commitments along the line."
O'Neill was vague about just what kind of tax bill he would support. Evidently unhappy with the White House performance thus far, he noted that an alternative "is being written, in part, by (Treasury Secretary W. Michael) Blumenthal and some members of Ways and Means," led by Rep. Joseph Fisher (D-Va.).
The Fisher plan would eliminate the capital gains tax on sales of principal residences by those aged 60 and older, and would reduce the minimum tax by doubling the offsetting deductions now available.
"Whether it has the support of President Carter. I don't know." O'Neill remarked crisply. Even the Fisher bill provides a bigger cut in capital gains revenue than he would like to see, he said, but a source close to the leadership said the speaker was simply seeking to mollify House liberals with that remarks.O'Neill is "for Fisher," this source said. "He is just covering his flank with the liberals by not saying it's the greatest thing since sliced bread."
In any case, the speakermade clear that he is determined to provide the House an opportunity to vote on a less drastic cut than Ullman-Jones, even if this requires caucus action.
Rep. Charles A. Vanik (D-Ohio) told a reporter he has been advocating taking the issue to the caucus in hopes of heading off "fat cat" tax cuts. He said he would urge simple extension of 59 billion worth of tax cuts due to expire this year and a dificit-cutting feature to hold down federal borrowing.
Another member of Ways and Means, Richard Gephardt (D-Mo.), said some younger House members would also like to go to the caucus to head off Steiger-Jones-type proposals but there is no wide-spread agreement on an alternative. Without that, consideration of the complicated tax issue in the 287-member caucus could be risky.
Some members "have so many objections to everything they see that they would like to send a bill to the president that he will veto," Gephardt said. "They feel failure to pass a bill will be better that anything we can get."
In another development yesterday, House Budget Committee Chairman Robert Giaimo (D-Conn.) criticized a Republican proposal to cut income taxes one-third over the next three years. He said it would accelerate inflation and cause higher federal budget deficits.
Giaimo said studies conducted for his committee estimate that if the so-called Kemp-Roth tax cut passed, the deficit would be as much as $130 billion by 1981.
By contrast, Giaimo said, the $20 billion tax cut the president has proposed and Congress has tentatively adopted in its first budget resolution would result in a deficit between $25.8 billion and $37.6 billion in 1981.
Giaimo said the Republican tax bill - which would, over a three-year period, cut income taxes 33 percent - also would add at least one percentage point, and perhaps as much as four percentage points, to the consumer price index by 1984.