Washington — House Republicans want to augment President Bush's $1.6 trillion tax cut by reducing capital gains taxes for investors, raising incentives for people to save for retirement and letting businesses recoup computer expenses more quickly.
"We're going to continue to insist we can do more," House Majority Leader Dick Armey, R-Tex., said in a speech Monday to the National Association of Broadcasters. "You have ample room for tax reductions that are larger."
Bush insists that the 10-year, $1.6 trillion plan anchored by across-the-board income tax cuts has the proper components and size. Armey said the president's plan doesn't do enough to encourage investment to stave off recession and boost individual retirement savings.
Armey said the House should pass this year:
l Legislation that got 401 favorable votes in the House last year to raise the annual contribution limits for an individual retirement account from $2,000 to $5,000 and for a 401(k) from $10,500 to $15,000. This year's virtually identical version of the bill, which would make numerous other pension law changes, will be introduced this week by Reps. Rob Portman, R-Ohio, and Ben Cardin, D-Md.
l An unspecified cut in capital gains taxes on sale of stocks, bonds and most other investments. The current rates are 20 percent for most investments held over one year, except for people who pay income taxes in the lowest 15 percent bracket. Under long-term rules that took effect starting this year, investments held longer than five years qualify for lower rates of between 8 percent and 18 percent depending on income levels.
l A tax break allowing businesses to write off computer expenses immediately, instead of gradually recouping the cost through depreciation generally, hardware over five years, software over three years. Proponents note that computers, which are frequently an integral part of other machinery, become obsolete quickly and say the tax break would spur greater investment and innovation.
Sen. Trent Lott, the Senate's Republican leader, agreed Monday that cutting capital gains taxes "would be a very positive thing" for the economy but said it will be difficult to push a larger tax cut through the Senate. Lott, R-Miss., must deal with a Senate split evenly between Republicans and Democrats, who say Bush's plan is already far too large and would likely argue that cutting capital gains taxes would benefit mainly the wealthy.
"Let me just say that there will be capital gains rate cuts in the future," Lott said. "I don't know whether it will be right away or later on, but at some point."
The tax-cut opposition gained powerful voices Monday when former Treasury Secretary Robert Rubin and former Federal Reserve Chairman Paul Volcker, speaking on behalf of the bipartisan Concord Coalition budget watchdog group, called Bush's $1.6 trillion plan too large and a risk to the nation's economy.
"This tax cut can only be described as fiscally unsound," Rubin said at a news conference.
Rubin and Volcker said a 10-year tax cut for a short-term fiscal stimulus to the economy is unnecessary. It would be better for Congress to provide a temporary tax cut covering the next two to three years, Rubin said, with an option of passing a second cut later if projected budget surpluses materialize.
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