[Congressional Record Volume 143, Number 106 (Thursday, July 24, 1997)]
[Extensions of Remarks]
[Pages E1506-E1507]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     SUPPORT FOR A MEANINGFUL REDUCTIONS IN CAPITOL GAINS TAX RATES

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                            HON. JERRY MORAN

                               of kansas

                    in the house of representatives

                        Thursday, July 24, 1997

  Mr. MORAN of Kansas. Mr. Speaker, I rise today to enter into the 
Record a letter from one of my constituents, Alan E. States of Hays, 
KS, which was recently published in USA Today. Mr. States lays out 
precisely what is wrong with a Tax Code that discourages 
entrepreneurship and savings. He writes,


       Twenty-five years ago, I purchased 80 acres of Kansas 
     farmland for $10,000. The money came from my savings while in 
     Vietnam, which, along with my Chevy, constituted my entire 
     net worth. I was just glad to be alive, home again and ready 
     to live the American dream.
       I used the 80 acres as a down payment on 400 additional 
     acres and proceeded to build my own farm. I've been 
     successful and now farm more than 4,000 acres. Much of it is 
     rented.
       Now I have another business opportunity. I considered 
     selling the farmland to raise the investment money. I could 
     sell the 80 acres for $40,000. The federal capital gains tax 
     would come to $8,400.
       The problem is that because of inflation since I purchased 
     the land, my true basis on the land is $37,000. So my real 
     gain on the sale is only $3,000. Therefore, the $8,400 tax 
     represents a 280% tax on my actual gain. Is this what has 
     become of the American dream? This is the system the 
     President proposes we keep.
       The tax code makes no sense. Income and estate taxes for 
     too long have tried to redistribute wealth. It hasn't worked. 
     The code should have the sole purpose of raising revenue. If 
     we are to tax income, it should be fair.
       To be fair, it must do four things: Tax all income; tax it 
     the same without regard to source; tax it only once; and tax 
     it only if it is real and not the result of inflation.
       What will I do under the current system? I certainly won't 
     sell the land. I will borrow against it. I can borrow the 
     land at 8.5%. I can deduct the interest as a business 
     expense, reducing my rate to 5.2%. From that, I adjust for 3% 
     inflation, and my effective rate of borrowing the money is 
     only 2.2%. the tax code discourages savings and encourages 
     debt.
       Rather than the Treasury making $1,200 on the sale of the 
     asset, it now loses $1,300 because of my interest expense. Do 
     some people really say we can't have tax reform because it 
     will cost the Treasury too much?
                                                      Alan States,
                                                         Hays, KS.


[[Page E1507]]


  Mr. Speaker, the real tragedy is that stories such as this can be 
told by countless Americans struggling to build a better life for 
themselves and their children. To those who deride the Republican tax 
bill, I would challenge you to explain to Mr. States how a Tax Code 
that stifles investment, discourages savings, and destroys the American 
dream should not be reformed. I cannot give such an explanation. That 
is why I insist on meaningful reductions in capital gains tax rates.

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