On cutting the capital-gains tax

The editorial "Tax-Cut Politics" Oct. 29, is halfway on target. Sen. Lloyd Bentsen's proposed tax cut plan does indeed smell like a political ploy. A cynic would argue that it is designed to buy enough middle-class votes to elect a Democratic president in 1992 - one who would then promptly raise taxes.The proposal to cut the capital-gains tax, however, cannot be dismissed in a similar fashion. Any truly equitable tax system taxes capital gains at a lower effective rate than wage and salary income (as in other major industrial countries). There are two reasons for this. Unlike wage and salary income, capital-gains income includes an inflationary component. Also, an investor who earns capital gains faces a prospect of a loss on his investment. Taxing capital gains at a lower rate offsets the effects of inflation and risk on capital-gains income and is a necessary part of an equitable tax system. Therefore, regardless of what the short-term gains would be, we should cut the tax rate on capital gains. Mark Wylie, Los Angeles

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