Ways without means.

DAN ROSTENKOWSKI, chairman of the House Ways and Means Committee, wants more taxes to pay for more tax breaks-tax credits for low-income workers, builders of low-income housing, employers of disadvantaged workers, financers of mortgages and small businesses, and businesses involved in research and development. More than enough funds for such tax breaks could easily be raised by reducing the tax rate on capital gains, which would also invigorate the sagging economy by making households feel more wealthy and by making it easier for S&Ls and entrepreneurs to find needed equity capital. But the chairman says he can't finance Democratic tax breaks with this "Republican" tax break, because he doesn't believe in tax breaks.

His worry seems to be that lowering the tax on capital gains might benefit people with high incomes. Yet there is no "means test" on the tax breaks he does favor, with the sole exception of the earnedincome tax credit. Tax breaks for builders of lowincome housing may or may not benefit those with low incomes, but they unquestionably benefit builders. Tax breaks to subsidize those who buy bonds that finance mortgages and small manufacturers may or may not reach the intended beneficiaries, who need not be poor in any case. Even retaining the researchand-development tax credit, which is indeed beneficial for the entire economy, can scarcely fail to benefit affluent people who own shares in companies buying and producing scientific research. Evidently, Chairman Rostenkowski is not really bothered by the unavoidable reality that someone must always gain added wealth from any tax break that enables the economy to produce added wealth. Instead, he has a purely ideological aversion to a form of income perceived as typically belonging to the rich.

When Mr. Rostenkowski recanted on his brief willingness to even consider reducing the tax rate on capital gains, he confessed that he was bowing to pressure ftom fellow Democrats. The egalitarian liberals in his party, proven losers such as Richard Gephardt, actually believe that preventing people from earning high incomes will be a popular political issue. Yet the Ways and Means Democrats want, above all, to halve the immensely unpopular progressive surtax recently imposed to finance catastrophic-illness insurance. That new tax, reports the Wall Street Journal, "has riled thousands of upper-income senior citizens." Mr. Rostenkowski's refusal to remedy the excessive taxation of capital gains will likewise rile millions from this same "upper-income" group, among many others. Couples facing retirement, including those with small pensions, often have to pay a huge tax on nominal capital gains because retirement requires selling off assets acquired through a lifetime of saving. Liberal Democrats count such one-time gains as "income," and thus conclude that a sensible capital-gains tax would benefit "the rich." We expect such muddled economics from the surviving liberal Democrats, but nonetheless expected better political sense.

Lacking the backbone to stand up to the demolition wing of his party, Rostenkowski is groping for a bunch of impossible tax schemes to make up for the vastly underestimated revenues that a lower capitalgains tax would surely yield. He wants to tax the stuffing out of two manufacturers of ozone-depleting chemicals, as though they should pay for the privilege of being put out of business, by law, in a very few more years. He also wants extra taxes on those who bought mutual life insurance, which would raise the cost of insurance retroactively, or reduce the benefits. These schemes would hurt so many little folks that they will never fly-and never raise a dime. But the political backlash will nonetheless serve the useful purpose of shortening the political careers of some gullible politicians who go along with taxing people's life insurance, or promoting layoffs at chemical companies. By contrast, nobody is hurt by a lower capitalgains tax, and everyone who saves for the future can benefit, as would the economy itself Stubborn ideological support for a punitive tax on capital gains helped defeat both George McGovern and Jimmy Carter. With Chairman Rostenkowski's help, the egalitarian Democrats

are again setting the stage for a huge Capitol Gain for Republicans.