[Congressional Record Volume 141, Number 1 (Wednesday, January 4, 1995)]
[Extensions of Remarks]
[Page E15]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


               INTRODUCTION OF CAPITAL GAINS TAX PROPOSAL

                                 ______


                          HON. RICHARD E. NEAL

                            of massachusetts

                    in the house of representatives

                       Wednesday, January 4, 1995
  Mr. NEAL of Massachusetts. Mr. Speaker, today I am introducing 
legislation, the Middle Class Income Tax Relief Act of 1995, which 
provides a capital gains tax cut for working class Americans. This 
legislation provides a lifetime capital gains bank of $200,000. Any 
taxpayer throughout the person's lifetime would have a capital gains 
bank of $200,000. Under this legislation, a taxpayer could exclude up 
to 50 percent of the gain on the sale of a capital asset, up to the 
limit in the maximum tax rate of 19.8 percent.
  The benefit of lifetime capital gains tax bank would phase out as a 
taxpayer's income increases above $200,000. Under this legislation 
individuals who sold stocks saved for retirement or a second home, or 
elderly individuals, who have a large gain in the sale of their 
principal residence, would benefit. The proposal includes a 3-year 
holding period for the capital asset. Short-term stock speculators 
would not be able to qualify for the benefit.
  In addition, the bill allows taxpayers to index the cost of real 
estate for inflation. An inflation-induced gain is not a capital gain 
and should not be subject to tax.
  Lately, there has been much said about the necessity and benefits of 
a capital gain tax cut. A capital gains tax cut is a valid measure, but 
a capital gains tax needs to be economically feasible and to benefit 
the middle-class. A capital gains tax cut needs to be responsible. I 
believe the Middle Income Tax Relief Act of 1995 is an appropriate 
capital gains tax cut.
  Mr. Speaker, I insert a summary for the Record.
            Summary of Middle Income Tax Relief Act of 1995

       Individuals would have a lifetime capital gains ``bank''.
       Bank limit would be $200,000 per person.
       All individuals would be entitled to the $200,000 bank: for 
     example each spouse of a married couple would each have a 
     separate limit.
       Any individual who sold a qualified asset could exclude up 
     to 50% of the gain on the sale, up to the $200,000 limit.
       Qualified assets would include all capital assets under the 
     present law, except collectibles.
       Under the bill, the maximum tax rate on capital gains 
     income would be 19.8% (i.e. \1/2\ of the maximum 39.6% rate).
       The full benefit would be available in any year that a 
     taxpayer had adjusted gross income in excess of $200,000.
       In the case of a sale or exchange of real property, 
     taxpayers would be able to index their basis in the asset to 
     the rate of inflation. Thus, no tax on inflation-induced 
     gains.
       Example: taxpayer buys a house for $100,000 and sells it 9 
     years later for $200,000. Inflation was 5% per year over the 
     9-year period. Basis for measuring gain is $145,000 so gain 
     is $55,000.
       A 3-year holding period would apply so that the deduction 
     would not be available to any taxpayer who held the asset for 
     less than 3 years.
     

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