[Congressional Record Volume 141, Number 14 (Tuesday, January 24, 1995)]
[Extensions of Remarks]
[Page E168]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


           THE CAPITAL FORMATION AND JOBS CREATION ACT OF 1995

                                 ______


                            HON. BILL ARCHER

                                of texas

                    in the house of representatives

                        Tuesday, January 24, 1995
  Mr. ARCHER. Mr. Speaker, I am introducing the Capital Formation and 
Jobs Creation Act of 1995. I am proud that its provisions have been 
incorporated into the Contract With America. Speedy enactment of this 
bill will encourage investment in America, create jobs, reduce the cost 
of capital, and lead to greater short-term and long-term economic 
growth.
  Compared to our major trading partners, Americans invest and save far 
too little. The Tax Code's poor treatment of savings and investment is 
a large reason why. We can best help American workers and businesses 
compete in the international marketplace by sweeping away these 
counterproductive tax disincentives. My bill does just that.
  It contains three important capital gains incentives: First, a 50-
percent capital gains deduction, second, indexation of the basis of 
capital assets to eliminate purely inflationary gains, and third, a 
provision to treat the loss on the sale of a home as a capital loss. 
The 50-percent capital gains deduction and the home sale capital loss 
provision would apply to sales on or after January 1, 1995. The capital 
gains indexation would apply to inflation, and sales of capital assets, 
occurring after December 31, 1994. All three of these provisions would 
make the Tax Code fairer by removing anti-taxpayer, anti-investment 
provisions.
  The bill would substantially cut--at all income levels--the tax rate 
on capital gains by allowing taxpayers to deduct one-half of the amount 
of their net capital gains. Currently, capital gains are taxed at the 
same rate as ordinary income, subject to a tax rate cap of 28 percent. 
Thus, there is a modest capital gains differential for the upper tax 
rate brackets, but principally because the 1993 Clinton tax plan raised 
income tax rates. All taxpayers need a capital gains break, and not 
just one created by raising income tax rates. Unlike the 1993 Clinton 
tax plan, the bill would provide a middle-class tax cut by halving the 
capital gains tax rate for lower- and middle-income taxpayers. The new 
effective capital gains tax rates would be 7.5 percent, 14 percent, 
15.5 percent, 18 percent, and 19.8 percent for individuals. 
Corporations would be subject to an effective top capital gains tax 
rate of 17.5 percent.
  In addition, my bill would end the current practice of taxing 
individuals and corporations on gains due to inflation. Currently, 
taxpayers must pay capital gains taxes on the difference between an 
asset's sales price and its basis-- the asset's original purchase 
price, adjusted for depreciation and other items--even though much if 
not all of that increase in value may be due to inflation. The bill 
would increase the basis of capital assets to account for inflation 
occurring after 1994. Taxpayers would be taxed only on the real--not 
inflationary--gain.
  Finally, the bill would correct a wrong in the Tax Code by treating 
the loss on the sale of a principal residence as a capital loss. 
Currently, if a homeowner has to sell his or her home at a loss, that 
loss is not deductible-- even though future sales may be taxable. This 
is heads-the-government-wins tails-the-taxpayer-loses. By treating the 
loss on the sale of a principal residence as a capital loss, the loss 
would be deductible subject to the capital loss deduction and carryover 
rules.
  In the last election, the voters spoke clearly. They want less 
government and lower taxes. The Capital Formation and Jobs Creation Act 
of 1995 does both: it cuts taxes and shifts investment decisions from 
the Government to individuals and businesses. My bill sends a clear and 
unmistakable message that Congress is determined to dismantle barriers 
that are holding back the American economy.


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