A Tax Escape for the Few: A Tax Escape for the Few
In the past year, a group of individuals interested in investment banking and the stock market, with the aid of Washington legal advisers, has been quietly pushing a proposal to reduce the tax on capital gains.</br></br>A Senate finance subcommittee already has held little-publicized hearings on the proposal, and it is now being promoted before the House Ways and Means Committee as a ÛÏtax reform.Û</br></br>The essence of this proposal is that the proportion of a capital gain included in taxable incomeÛÓwhich now is only 50 per cent, of the gainÛÓshould he reduced still further. The proposed reduction would be in steps of 2 per cent a year for each year the asset is hold, up to 15 years. Thus, for stock held for 15 years, only 20 per cent of the gain on its sale would be taxable.</br></br>For the wealthiest individuals, those in the 70 per cent lop tax bracket, this proposal would thus reduce their tax on the gain from 35 per cent (70 per cent of 50 per cent of the gain) to only 14 per cent (70 per cent of 20 per cent of the gain). Ironically, 14 per cent is also precisely the rate of tax applicable to the wages of the poorest taxpayers in the country.</br></br>Any reduction in the capital gains tax on the sale of stock or other capital assets will primarily benefit high-income families. Recent statistics of income indicate that individuals and families with incomes above $25,000ÛÓ about 3 per cent of all lax returnsÛÓaccount for around 55 per cent of all capital gains. Taxpayers with more than $100,000 of incomeÛÓabout 0.1 per cent of all returnsÛÓreceive about 30 per cent of all capital gains.