Bush 1990 budget holds merit

It has been said that November’s elections, in which George Bush was elected president, were nothing more than an endorsement of the status quo.

Bush’s proposed budget to Congress for fiscal year 1990 seems to confirm the status quo theory. The budget is similar to the one proposed by Ronald Reagan with only a few alterations.

Those changes are significant, however. Bush proposed a one-year freeze on defense spending, which represents a $2.7 billion reduction from Reagan’s budget proposal. But Bush also made significant reductions in human resources.

Like Reagan, Bush hopes to trim the federal deficit by $94.8 billion through economic growth. There is no guarantee of that happening, however.

Bush does have an innovative way to promote growth. He proposed a 15 percent reduction in capital gains tax for long-held assets. Capital gains taxes are charged after the sale of stocks or bonds. Bush’s proposal would eliminate capital gains for those with incomes below $20,000.

Bush’s proposed changes in capital gains make sense. Those in lower income brackets are likely to hold capital investments for longer periods of time and should not be burdened by such high taxes when it is finally time to sell.

The elimination or reduction in expensive capital gains taxes will promote more investments from those with moderate and lower incomes. The tax would be retained for higher income speculators who buy and sell frequently.

Unfortunately, Bush’s capital gains proposal is unlikely to go through the Democratic-controlled Congress. Without some kind of increased revenue growth, Bush might be forced to raise taxes to meet the Gramm-Rudman mandated balanced budget.