[Congressional Record Volume 141, Number 140 (Monday, September 11, 1995)]
[Senate]
[Pages S13182-S13183]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        THE CAPITAL GAINS DEBATE

  Mr. HATCH. Mr. President, it is not quite on this subject, but since 
my friend from Massachusetts raised the issue I thought I would just 
spend a few minutes on it because it is something that is near and dear 
to my heart and I think near and dear to, really, those of a pretty 
good majority of this body.
  One of the worst perceptions about the capital gains debate is that 
only the rich are going to benefit from a capital gains rate reduction. 
My friend from Massachusetts implied that and implied that those of us 
who are for a capital gains rate reduction are basically taking care of 
our good old rich friends. I do not have many rich friends. I have to 
say that I was born in poverty, came up the hard way. I am one of the 
few in this body who learned a trade, went through a formal 
apprenticeship program, became a journeyman and worked in the building 
construction trade unions for 10 years, putting myself through high 
school. I had to work to get through high school, college and law 
school. So I do not think it is a matter of rich friends at all.
  The fact of the matter is, nothing could be further from the truth 
with regard to capital gains. In fact, Americans at all economic levels 
will benefit from increased growth. President John F. Kennedy once 
said, basically while he was enacting a capital gains rate reduction 
which proved to be very efficacious for our country, ``a rising tide of 
investment lifts all boats.'' President Kennedy supported a capital 
gains cut because thousands of middle-class Americans would benefit 
from it.
  In 1992, 56 percent of Federal income tax returns claiming capital 
gains--56 percent of those returns claiming capital gains--were from 
taxpayers with incomes of $50,000 or less, and 83 percent came from 
taxpayers with incomes of less than $100,000. Almost all of them came 
from people who earned less than $100,000. But, again, keep in mind, 56 
percent came from those who earned less than $50,000. Only the rich?
  The preferential capital gains tax benefits every American who 
believes in the American dream, who is willing to take a risk for a 
long-term reward. Millions of American families that own farms or small 
businesses will benefit from the capital gains tax. Yes, in 1 year of 
their productive lives, a husband and wife may have a high income, in 
the year they sell their family farm or small business. But that is one 
reason these statistics can be so misleading. The capital gains 
differential is just as much about Main Street as it is Wall Street. 
This amendment rewards risk taking and sacrifice, and that is the right 
thing to do.
  The opponents of the capital gains tax rate cut argue that it 
benefits mostly the wealthiest income groups. This assertion is based 
on deceptive statistics. The income figures used in these statistics 
include the taxpayer's entire income, which includes the capital gain. 
This makes the capital gains tax cut appear to be a tax cut for the 
rich.
  A far more accurate picture results when only recurring or ordinary 
income is considered. Let me give an example. An elderly couple living 
in Cache County, UT, has been farming on land they owned for 40 years. 
The land was purchased for $50,000 in 1950. They decided to retire to 
St. George, UT, and thus, they sell their farm for $250,000 after 
farming it for 40 years, having paid $50,000 for it.
  This couple has never reported more than $35,000 of gross income on 
their tax returns in their life, never more than $35,000 in any given 
year. But in the year of the sale of their farm, they report more than 
$200,000 of gross income. Are these people among the very wealthiest 
income earners of our Nation? Of course not.
  The Department of the Treasury statistics show that this example is 
not just the exception, it is the rule. If capital gains are excluded 
from income, only about 5 percent of tax returns containing long-term 
capital gains have incomes of over $200,000. Only 5 percent.
  A Treasury study covering 1985 shows that taxpayers with wage and 
salary income of less than $50,000 realized nearly one-half of all 
capital gains in 1985. In addition, three-quarters of all returns with 
capital gains were reported by taxpayers with wage and salary income of 
less than $50,000 in that year. So let us not kid anybody. Of course, 
those who are wealthy will benefit, but they generally put their moneys 
back into investments or into businesses, into creation of jobs and 
economic opportunity for others. So we should not begrudge the fact 
that they benefit as well.
  But a huge, huge number of middle-class people benefit from capital 
gains rate reductions not just because they themselves have capital 
gains to pay taxes on, but because they benefit from the stimulation of 
the economy that occurs when money is rolled over and utilized in 
creating new jobs and new job opportunities.
  A Joint Tax Committee analysis of the years 1979 to 1983 found that 
44 percent of taxpayers reporting gains realized a gain in only 1 out 
of 5 years. This is the occasional investor, the home or business 
owner, who is realizing these gains. When we move beyond the class 
warfare rhetoric, we find that capital gains tax cuts help working 
Americans.
  High capital gains taxes especially hurt elderly taxpayers. Capital 
gains for seniors average four to five times the size for capital gains 
for younger taxpayers. In fact, in any year more than 40 percent of 
taxpayers over the age of 60 pay capital gains taxes.
  So, the fact of the matter is, it is deceptive to argue that capital 
gains benefit only the wealthy. They benefit everybody.
  I believe if we cut capital gains, we will unleash some of the $8 
trillion in 

[[Page S 13183]]
this economy that is locked up in capital assets that people will not 
sell because they do not want to pay 28 to 39 percent in a capital 
gains tax. Once we unleash that--if we could just unleash 10 percent of 
that money, can you imagine what a stimulation and stimulus that would 
be to our economy?
  Taxpayers are very sensitive to capital gains reductions. This is 
especially true for the most affluent Americans. As a result, Americans 
will realize many gains as soon as the rate changes. This will raise 
tax revenue, probably by an amount far above joint tax estimates.
  Joint tax estimates are among the most conservative estimates you can 
have. I will not go into the details on this, but we can say in the 
last 30 years, every time capital gains rates have gone up, revenues to 
the Federal Government have gone down from selling capital assets. 
Every time capital gains rates have been dropped, or lowered, revenues 
to the Government have gone up. It just makes sense, especially when 
you realize there is $8 trillion locked up in capital assets that they 
will not sell, they will not trade, they will not move because of the 
high rate of taxation that we have today.
  Let us lower that capital gains rate and benefit all Americans, but 
especially--especially--the middle class and those earning under 
$50,000 a year who will benefit greatly from it, and get some sense 
into this system so we push the better aspects of our system. Let us 
get rid of some of this demeaning rhetoric that literally cuts into 
the--really cuts against what are the real facts with regard to capital 
gains and capital gains rate reductions.
  I am very strongly for a capital gains rate reduction because I think 
it will benefit virtually everybody in our society, the poor as well, 
because there will be more jobs and more economic opportunity than 
before the rates are cut.
  Mr. President, I yield the floor.

                          ____________________