Reducing Taxes on Capital Gains

The column by Rep. Don J. Pease (“Back Into the Thicket With Bush; Capital Gains Break Would Undo Fairness of Tax Reform,� Op-Ed Page, Feb. 1) attacked President Bush’s capital gains tax reduction proposals. How can people bemoan our nation’s low rate of savings and still support taxing savings and investment? What kind of sense does it make to allow tax deductions for debt, and yet tax savings?

When Rep. Pease (D-Ohio) raises the “fat cat� argument, trying, like his party’s recent presidential candidate, to create antagonism for the wealthy, he displays his true colors. We all know that the poor do not save. Clearly, middle-class wage earners, living from paycheck to paycheck, do not save or invest. How do we get our nation’s saving rate higher without increasing the benefits and incentives for saving, not consuming, income?

Those who save are by definition wealthy enough to have the income to invest. Such savings are with after-tax income--that is, already-taxed money. It is the investment and savings of the “fat cat� wealthy which create jobs for the rest of us. Does taxing these savings and investment returns seem like a helpful incentive to consume less and save more?

Debt is tax deductible. What the “tax reform� act of 1986 did was to raise the value of debt related to housing, reduce the deduction for consumer debt and raise the tax on savings and investment from 20% to 28%. That was a 40% increase in taxes on the kind of thrift which leads to future savings and investment!

The real problem is that politicians want to control the savings and investment of our nation--target it, so to speak--making them more powerful and capable of dispensing favors to the political action committees who pay for their reelection.

ROBERT H. JACOBS

Los Angeles