Democrats Assess Tax Plan Defeat, Vow Partisan Drive

By WILLIAM J. EATON and TOM REDBURN

Sept. 29, 1989 12 AM PT

Times Staff Writers

WASHINGTON — Dispirited Democrats, stunned by the size of President Bush’s victory in the House on reducing capital gains taxes, vowed Thursday to take a more aggressive and partisan stance toward the White House on the budget and other issues.

Jubilant Republicans, however, predicted the emergence of a working coalition of GOP members and “common-sense Democrats” that would propel Bush’s economic proposals through the House in the years ahead.

Leading Democrats, despite the major setback, contended that they would gain politically because they have fresh reason to brand Republicans the party of the rich. The capital gains tax cut, they said, would shower most of its benefits on the highest-income taxpayers.

Calls It ‘Disgusting Greed’

“This is outright, disgusting greed,” declared Rep. Marty Russo (D-Ill.), “and don’t paint it any other way.”

Republicans, by contrast, said that they would turn the Democrats’ unsuccessful alternative to the capital gains tax cut against them politically. The Democrats proposed expanding the tax benefit for individual retirement accounts and paying for the new tax break by increasing the income tax rate that applies to very high incomes.

Even though the higher tax rate would affect only 600,000 taxpayers with incomes of about $200,000 or more, Republicans said that it could be used to paint their opponents as advocates of tax-and-spend politics. To the tune of Irving Berlin’s “Always,” Rep. Guy Vander Jagt (R-Mich.) accused Democrats of saying: “I’ll be taxing you, always.”

The Democratic alternative was defeated, 239 to 190, with 64 Democrats--one-quarter of the 257 Democrats in the House--siding with the Republicans. The ranks of the defectors included not only conservative Southerners but representatives from every part of the country. Among them was Rep. Beryl Anthony Jr. of Arkansas, chairman of the Democratic Congressional Campaign Committee.

“This was a watershed for us,” said Minority Leader Robert H. Michel (R-Ill.). His deputy, Newt Gingrich of Georgia, called it a signal of “a common-sense coalition under George Bush’s leadership.”

On the other side of the aisle, Rep. Robert T. Matsui (D-Sacramento), echoing the sentiments of many other Democrats who opposed the capital gains tax cut, told a reporter: “We (Democrats) have a lot to worry about. . . . We are no longer the governing party. Maybe we’ll need a Democratic leadership more willing to come up with our own program, a more aggressive program.”

Frank Annunzio (D-Ill.), a loyal leadership supporter, said: “We’re supposed to control the House--we don’t control the House, and people are getting more sophisticated about that.”

Warn of Future Problems

Democrats warned that Bush’s all-out support of the capital gains tax cut would undermine any future attempts between the White House and Congress to hammer out an agreement on spending, taxes and deficit reduction.

“We found out that Bush doesn’t believe in bipartisanship,” Russo fumed. “He uses bipartisanship to knock you off. . . . You won’t see budget summits any more. This was the first shot of the war against bipartisanship fired by the Republican Party.”

Rep. Leon E. Panetta (D-Monterey) argued that Bush and the Republicans won a short-term political triumph that would prove costly to the goal of cutting the budget deficit.

“The President has seriously undermined the bipartisan spirit that existed earlier this year for an attack on the deficit,” Panetta said. “Second, he has pushed through the House a plan that will add $21 billion to the deficit over the next 10 years.”

Rep. William H. Gray III of Pennsylvania, who ranks third in the House Democratic leadership, added: “If he (Bush) wants to spend his political capital on tax breaks for the wealthy, let him do it. Democrats win on that. . . . He won the battle, but I think he injured himself in his ability to win over the long haul.”

Gray said that he is skeptical whether a new conservative coalition will form in the mold of the Republicans and conservative Democrats who pushed former President Ronald Reagan’s tax and spending cuts through Congress in 1981.

“It will not hold up on defense, education and other issues,” Gray told reporters. “It won’t be there next week.”