(February 6) – “To win congressional support for eliminating the estate tax, the Bush administration is willing to consider imposing capital-gains taxes on estates, a senior White House aide said,” reports Michael Phillips in today’s Wall Street Jounral.

“President Bush will include estate-tax repeal — a foundation of his campaign — in the $1.6 trillion tax-cut proposal he will send to Congress this week. But to make that 10-year plan more palatable to some members of Congress, the president may agree to change current laws that allow heirs to escape capital-gains taxes on assets they inherit, according to Lawrence Lindsey, director of the White House National Economic Council. Under existing law, heirs have to pay capital-gains tax only on appreciation that occurs after the bequest.”

“In an interview, Mr. Lindsey said the president ‘never had his feet in concrete’ on the question of whether unrealized capital gains should be taxed at death. Mr. Lindsey said he would expect congressional tax writers to change that part of the president’s proposal.”

“Mr. Lindsey’s comments came as the president launched a weeklong public-relations campaign for his tax cut. In a scene reminiscent of the campaign trail, the president presented three American families from the lower and middle tax brackets who, he said, would save money fast under his plan — a clear effort to deflect Democratic attacks on his plan as biased toward the wealthy. The average family, he said, would save $1,600 on its federal income taxes if Congress approved his proposal, a break he said has been made more urgent because of high energy costs and a slowing economy.”

“The odds that Congress will approve a large tax cut have risen recently, thanks to the weaker economy and the endorsement of tax cuts by Federal Reserve Board Chairman Alan Greenspan.”

“But Mr. Bush still faces a battle with critics who argue his plan does little or nothing for millions of low-income working families who pay federal payroll taxes but little or no income taxes. The Center on Budget and Policy Priorities, a nonpartisan Washington research group, blasted Mr. Bush’s claim that his plan would help move the working poor into the middle class. A typical family of four would receive no benefit until their income reached at least 144% of the federal poverty line, or $25,867, the center concluded. It said the lowest-earning 40% of households would get just 4% of the overall tax benefits when the plan is fully in effect, while the 1% at the top of the income ladder would get 36% to 43% of the benefits.”

” ‘When you look at the reality, the plan leaves out the working poor and does remarkably little for low-income families,’ said Robert Greenstein, the center’s executive director.

“Mr. Lindsey countered that middle-class families will get the largest percentage cut in their income taxes under the Bush plan, even if higher-income families get larger dollar cuts.”