[Congressional Record Volume 143, Number 86 (Thursday, June 19, 1997)]
[Extensions of Remarks]
[Pages E1263-E1264]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    ``BEST TAX-CUT PROPOSAL APPEARS TO FACE ROADBLOCK IN CONGRESS''

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                           HON. DOUG BEREUTER

                              of nebraska

                    in the house of representatives

                        Thursday, June 19, 1997


  Mr. Speaker, this Member highly commends to his colleagues the 
following editorial supporting the proposed capital gains tax cut which 
appeared in the Omaha World Herald on June 18, 1997.

              [From the Omaha World Herald, June 18, 1997]

      Best Tax-Cut Proposal Appears To Face Roadblock in Congress

       Democrats and Republicans on Capitol Hill are negotiating 
     the specifics of legislation to reduce taxes by a net $85 
     billion over the next five years. Unfortunately, the best 
     proposal in the tax-cut package--reducing the capital-gains 
     tax--is the hardest one to sell politically.

[[Page E1264]]

       When stocks, homes, farms or small businesses are sold by 
     an individual, an estate or a trust for more than what the 
     seller paid for them, the seller pays a 28 percent tax on the 
     difference in price--the long-term capital gain. While this 
     is less than the current maximum tax rate on ordinary income, 
     39.6 percent, the 28 percent capital-gains tax rate still 
     causes some holders of capital assets to refrain from 
     investment transactions that could stimulate the economy and 
     create jobs.
       Republicans once talked of reducing the capital-gains tax 
     rate to as low as 15 percent as a way to encourage 
     reinvestment. Now they seem resigned to the idea that a 
     reduction of 8 percentage points may be the best they can do.
       A capital-gains tax cut is difficult to accomplish because 
     Democrats keep pounding on the idea that only rich people 
     receive income from selling property--a claim that never 
     seems to die no matter how many times it is proven false. 
     House Democrats have said they are willing to consider 
     reducing the tax on the gains from the sale of a small 
     business or family farm but not the tax on the gains from the 
     sale of other capital assets.
       Many Americans have legitimate concerns about the excessive 
     compensation going to some large-corporation chief 
     executives--people who receive millions of dollars annually, 
     sometimes even when their company's performance is flat. 
     Republicans are still smarting from the campaign by Democrats 
     who said Republicans were going to ``gut health care for the 
     elderly to fund a tax cut for the rich,'' a campaign that was 
     based on a lie.
       For these reasons, some Republicans are skittish about 
     taking a hard line on a capital-gains tax cut.
       Bipartisan support exists for a $500-per-child annual tax 
     credit for families, though there is disagreement over the 
     level of annual income at which to cut off the credit. 
     Democrats want to draw the line at $75,000. Republicans 
     favor a ceiling of $100,000. Republicans are challenging 
     the Democratic contention that poor families who do not 
     pay income taxes ought to get the per-child credit anyway, 
     in the form of a government check. There also is 
     disagreement about the age of children for whom the credit 
     could be claimed, with the White House and various 
     factions in Congress proposing top ages from 12 to 18.
       President Clinton's proposal for tax breaks tied to college 
     expenses also is difficult for politicians to resist. 
     Democrats want $35 billion in tax credits and deductions for 
     families sending children to college. Families would receive 
     a tax credit of $1,500 for each college student or deduct 
     from their taxable income up to $10,000 a year in college 
     expenses. Republicans offer a more modest plan, with credits 
     for 50 percent of tuition costs up to $3,000 a year.
       The final version of the tax legislation is likely to 
     include the popular per-child and college-tuition credits in 
     some form, even though the credits are not large enough for 
     individuals to have much stimulus effect on the economy. 
     Moreover, they probably will have to be modified to fit 
     within the target number of $135 billion in tax cuts. (A 
     proposed $50 billion in tax increases would leave $85 billion 
     in net tax relief over five years.)
       Prospects for cutting the capital-gains tax rate to 20 
     percent are dim. A cut in the inheritance tax rate and an 
     increase in the amount (currently $600,000) that can be 
     passed to heirs free of federal estate tax also are generally 
     opposed by Democrats.
       That is disappointing. Republicans are right about the job-
     creating potential of a significant capital-gains tax cut and 
     the fundamental fairness of reducing the effective 
     inheritance tax rate. Instead, taxpayers with children are 
     likely to get a modest credit of limited value as an 
     incentive to new investment.
       The overall tax-cut package could be a similarly bland 
     compromise--a far cry from the bold $200 billion tax cut 
     originally advocated by the GOP.

     

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