[Congressional Record Volume 143, Number 1 (Tuesday, January 7, 1997)]
[Extensions of Remarks]
[Page E45]
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

                        Tuesday, January 7, 1997

  Mr. NEAL of Massachusetts. Mr. Speaker, today I am introducing 
legislation, the Middle Class Income Tax Relief Act of 1997, 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 1997 provides an 
appropriate capital gains tax cut.
  Mr. Speaker, I insert a summary for the Record.

            Summary of Middle Income Tax Relief Act of 1997

       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 have a separate 
     limit.
       Any individual who sold a qualified asset could exclude up 
     to 50 percent 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 percent (i.e. \1/2\ of the maximum 39.6 
     percent rate).
       The full benefit would not 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 percent per year 
     over the 9-year period. Basis for measuring gain is $145,000 
     so gain is $55,000.
       A three 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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