Rep. David Dreier
Thursday, April 24, 1997
Until a recent
NPR commentary, I thought I'd heard the last of the outdated class
warfare rhetoric claiming that a capital gains tax cut is a tax
cut for the rich.
In reality,
the capital gains tax targets middle America.
63 million American
families own mutual funds. Most pay capital gains taxes each year
on the unrealized gains of the funds, even when the value of their
shares decline.
Small businessmen,
family farmers, ranchers and entrepreneurs often have to sell land,
machinery, and the businesses they nurtured from the ground up,
to prepare for retirement.
Homeowners facing
a mid-life career change may need to sell a large home and use the
gains to begin a start-up business.
And, millions
of retirees live off savings to maintain their standard of living.
The IRS reports
that 40 percent of annual capital gains are realized by people with
incomes of less than $50,000.
The rich don't
need a capital gains tax cut. The New York Times detailed
in December how the capital gains tax is "becoming largely academic
to the nation's wealthiest taxpayers." David Bradford, an economist
at Princeton University, expressed his view in that article when
he said: "The Government can adopt rule after rule after rule
-- but the people who will get stuck paying capital gains taxes
will be the ordinary investors."
Rather than
getting bogged down in class warfare, we should pursue policies
that address our three most pressing economic needs -- increasing
real economic growth, raising the wages of working Americans and
balancing the budget.
Cutting the
capital gains tax rate in half, as I have proposed in legislation
cosponsored by 130 Democrats and Republicans in the House of Representatives,
offers one of the most reliable, fair and fiscally responsible methods
of achieving those goals.
We must balance
the budget because mounting debt saps life from the productive sectors
of our economy, siphoning resources needed for essential government
programs. Rather than adding to the deficit, empirical evidence
from past capital gains tax reductions shows that this tax rate
reduction increases federal revenues.
We must also
help working families that have seen their incomes stagnate as they
try to prepare their children to get good 21st century jobs. A study
by the Institute for Policy Innovation projects that cutting the
capital gains tax in half will increase the income of working families
by $1,500 per year.
We owe those
working families a broad-based capital gains tax cut to ensure that
plentiful technology, tools and high-wage jobs are available as
we proceed into the next century.