President Bush yesterday signaled a slackening commitment to press for a cut in capital gains taxes next year, saying he is reluctant to reopen a fight that cost him politically and divided his party this year.
Bush's statement comes amid a debate in his administration over whether to push capital gains and possibly a larger package of tax cuts to stimulate the economy and to counter anticipated Democratic moves to impose a surcharge on incomes over $1 million.
Last week, White House Chief of Staff John H. Sununu said the administration was likely to resubmit its proposal for the capital gains tax cut as the centerpiece of a package to promote economic growth. But Bush suggested yesterday in a session with regional editors that, for a variety of reasons, he may be lukewarm about it, despite his belief that it would help the economy.
"I'm a little worried -- I'll be honest with you, having laid this tax question down for awhile -- to reopen many, many aspects of it."
That sentiment reflects the opinion of Treasury Secretary Nicholas F. Brady, who has argued in internal debates that the tax issue is a loser politically and that the administration would be advised to avoid it next year, if possible.
But others in the administration, including Vice President Quayle, as well as key conservatives in Congress, argue that the Democrats will force the tax issue on the administration and that the best strategy is to counter with a package of tax cuts designed to promote economic growth and job creation.
Bush cited one practical obstacle facing the administration as it considers whether to push capital gains and other tax cuts. That is the $500 billion deficit-reduction agreement, which requires that any lost revenue be made up through spending cuts or offsetting tax increases.
Bush said that under the rules of the budget deal, the capital gains tax cut loses about $20 billion over five years.
"We're faced with practical problems as to what we can do, not just on capital gains but on other stimulus that costs money," Bush said.
Office of Management and Budget Director Richard G. Darman has argued in recent White House meetings that it will be difficult to find the revenue to pay for a package of tax cuts.
Administration sources said Darman has told other White House officials that neither cuts in domestic programs nor in entitlements programs can produce the kind of revenue needed for what some Republicans say should be a significant package.
Bush said he continues to dispute Democratic assertions that the capital gains cut is a tax break for the rich.
"I haven't given up on my philosophical commitment to the idea that capital gains would stimulate growth," Bush said. "And when you have slow or certainly a slowed down economy, in some areas recessional, it would be good."
Bush said he has not made a decision and that one idea under consideration is to junk the way the cost of a capital gains cut is calculated under the budget agreement. "I would love to think we could change the way we score it," he told the regional editors.
Brady made clear Sunday that he thinks it would be difficult for the administration to advocate the capital gains tax cut next year, given the budget agreement. On NBC's "Meet the Press," Brady said the rules would require Bush to raise other taxes to pay for capital gains "and the president is not going to raise taxes in 1991."