[Congressional Record Volume 141, Number 1 (Wednesday, January 4, 1995)]
[Extensions of Remarks]
[Pages E18-E19]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


            CAPITAL GAINS--CREATING JOBS AND TREASURY REVENUE

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                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                       Wednesday, January 4, 1995
  Mr. CRANE. Mr. Speaker, when I first ran for Congress in a 1969 
special election, the overriding theme of my candidacy at that time and 
the theme of my candidacy ever since, centered on fiscal 
responsibility--less spending and lower taxes. Although I was not 
initially able to serve on a committee directly dealing with tax or 
budget issues, in the 94th Congress, 1975-1976, I was honored with an 
appointment to the Committee on Ways and Means, the committee with 
jurisdiction over all tax matters that came before Congress. I have 
served on that committee ever since.
  In the years prior to my service in Congress, it had become clear to 
me that lower taxes stimulate economic growth, and this was certainly 
the case with regard to the taxation of capital gains. From the day I 
began serving in Congress I have pushed to reduce the rate of tax on 
capital. In the time I have served on the committee, we have reduced 
the capital gains rate twice, only to see the rate hiked back up 
through the enactment of the Tax Reform Act of 1986. In 1989, we came 
close to again bringing the rate back down, actually passing a 
reduction in the House, only to see the legislation die in the Senate. 
Now, with a new Republican majority in Congress and the Republican 
Contract With America, we have another opportunity to reduce the 
capital gains rate.
  Over the years I have sponsored, cosponsored, and supported many 
different capital gains proposals. Indeed, I am an original cosponsor 
of the contract's capital gains proposal offered by my long-time 
colleague and good friend, the new chairman of the Ways and Means 
Committee, Bill Archer. In addition, to cosponsoring Chairman Archer's 
legislation, however, I wanted to again introduce my own legislation to 
this Congress, not only to highlight my long-standing commitment to 
this issue, but to raise the matter of the appropriate rate of taxation 
for capital gains.
  In the next months, the Ways and Means Committee will be holding a 
series of hearings that will include debate and discussion of a capital 
gains rate reduction. We will discuss indexation of capital gains--
something I believe is absolutely critical--the period of time which 
capital must be held to qualify, and we will discuss the rate at which 
capital gains ought to be taxed.
  Frankly, I would love to see capital gains taxes eliminated 
altogether. Moreover, I believe any reduction in the rate will be 
beneficial to all Americans. However, if your intention is to greatly 
stimulate capital investment while at the same time maximize revenues 
to the Treasury, experts suggest that the capital gains rate should be 
set somewhat between 12-15 percent. The legislation I am introducing 
today would provide for a maximum capital gains rate of 15 percent for 
all brackets except for those in the lowest bracket, where the rate 
would be 7.5 percent.
  I would be remiss in closing this statement without making some 
additional comments with regard to the benefits of reducing the capital 
gains rate. First, all Americans will benefit from a reduction in 
capital gains tax, not just the rich. It is flat out wrong to state 
that only rich people will benefit from such a tax cut. Indeed, the 
last time we seriously debated the issue in 1989, Treasury Department 
statistics showed that almost 75 percent of those families/individuals 
filing tax returns which reported capital gains had incomes of less 
than $50,000, hardly the rich.
  Moreover, when the capital gains rate is reduced, not only does money 
flow more freely between capital investments but more money is invested 
in capital. Both of these consequences are highly beneficial, and the 
net result of more investment is more jobs. The small businessman who 
is taking a risk starting a new business will find it easier to attract 
investors to share that risk because the penalty for success has been 
reduced. Moreover, because a larger pool of money will become available 
for capital investment due to a reduced capital gains tax rate, the 
cost of that capital to businesses will go down.
  Another point that must be mentioned concerns how the change in the 
capital gains rate affects revenues to the Treasury--not a small issue 
in our dire budgetary circumstances. Critics of capital gains rate 
reductions have always tried to suggest that a reduction in the capital 
gains rate will mean a reduction in revenue to the Treasury. Nothing 
could be further from the truth. In reality, the past two times we have 
reduced the capital gains rate, revenues to the Treasury attributed to 
capital gains have actually increased. This happens because of the 
consequences I just mentioned. When the 
[[Page E19]] rate is lower, more money flows to capital and between 
capital assets. Thus, you have more capital gain transactions and it is 
the transaction which triggers the tax. Moreover, the economic growth 
generated by more available and cheaper capital creates jobs, which 
means more taxpayers.
  The vast majority of major industrialized countries in this world 
already know these benefits and their capital gains rates are 
significantly lower than the current rate in the United States. It is 
time that the United States got smart and caught up with the rest of 
the world. I look forward to a productive debate on the capital gains 
issue in the Ways and Means Committee and hope that our committee's 
capital gains initiative, in whatever final form it takes, passes both 
the House and the Senate and is signed into law by the President.


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