Tax Plans Compared

Tax Plans Compared

Capital Gains

SENATE ROTH
Same as the House with three key exceptions: no reduction in corporate capital gains rates; capital gains would not be indexed for inflation; for real estate the portion of the gain that reflects recapture would be taxed at 24 percent. The Senate would expand an existing provision designed to spur venture capital by allowing individuals a 50 percent exclusion on profit from the sale of a small business acquired at its initial offering, for an effective rate of 10 percent. Now, the exclusion applies only the first $10 million in gains, but the bill would set no limit. Also, the size of the small business that would be eligible for the exclusion would increase from $50 million in assets to $100 million.

HOUSE ARCHER
The top rate on individual capital gains would be reduced from 28 to 20 percent. The rate for taxpayers in the 15 percent income tax bracket would drop to 10 percent. The first $500,000 in gains on sale of a principle residence would be exempt. The cut would be effective after May 7, 1997, on the portion of any assets that were depreciated. The portion of a real estate gain reflecting depreciation would be taxed at 26 percent. Corporations, most of which currently pay a 35 percent rate, would see that drop to 32 percent in 1998, 31 percent in 1999 and 30 percent in 2000 for property held more than five years. Capital gains would be indexed for inflation starting in 2001, meaning when an asset held for at least three years was sold, the taxable profit would be reduced to account for inflation. Estimated cost: $2.7 billion over five years, $35 billion over 10 years.

SENATE DASCHLE
A 30 percent exclusion against ordinary income tax rates for assets held three years or longer. After 2003, the first $500 per family in dividends would be excluded from taxable income. This provision is available to additional exclusions contained in the amendment. Up to $500,000 in capital gains on the sale of principal residence would be exempt from taxation. The proposal will extend the availability of Section 1202 that provides a 50 percent exclusion for capital gains on small business corporate stock held for at least five years.

HOUSE GEPHARDT
Capital gains from sale of a family business or farm would be taxed at either 7.5 percent (for taxpayers in the 15 percent bracket) or 18 percent, up to a lifetime total of $600,00. This would not apply to publicly-traded stock, and the business would have to have been owned for three years to qualify for the lower tax rate. Up to $500,000 of capital gains on the sale of a home ($250,000 for singles) will be excluded from taxable income. Losses on the sale of a home up to $250,000 can be written off as ordinary deductions.

CLINTON PLAN
Taxpayers could exclude 30 percent of their long-term gains from taxation. The top rate on capital gains would be reduced from 28 percent to 27.7 percent, and high income taxpayers would add the 30 percent back into taxable income to figure their Alternative Minimum Tax. Joint filers would get an exemption on gains from the sale of a primary home up to $500,000. Estimated cost: $7.1 billion over 5 years, $15.6 billion over 10.

Tax Plans Compared
Capital Gains	SENATE ROTH Same as the House with three key exceptions: no reduction in corporate capital gains rates; capital gains would not be indexed for inflation; for real estate the portion of the gain that reflects recapture would be taxed at 24 percent. The Senate would expand an existing provision designed to spur venture capital by allowing individuals a 50 percent exclusion on profit from the sale of a small business acquired at its initial offering, for an effective rate of 10 percent. Now, the exclusion applies only the first $10 million in gains, but the bill would set no limit. Also, the size of the small business that would be eligible for the exclusion would increase from $50 million in assets to $100 million.	HOUSE ARCHER The top rate on individual capital gains would be reduced from 28 to 20 percent. The rate for taxpayers in the 15 percent income tax bracket would drop to 10 percent. The first $500,000 in gains on sale of a principle residence would be exempt. The cut would be effective after May 7, 1997, on the portion of any assets that were depreciated. The portion of a real estate gain reflecting depreciation would be taxed at 26 percent. Corporations, most of which currently pay a 35 percent rate, would see that drop to 32 percent in 1998, 31 percent in 1999 and 30 percent in 2000 for property held more than five years. Capital gains would be indexed for inflation starting in 2001, meaning when an asset held for at least three years was sold, the taxable profit would be reduced to account for inflation. Estimated cost: $2.7 billion over five years, $35 billion over 10 years.	SENATE DASCHLE A 30 percent exclusion against ordinary income tax rates for assets held three years or longer. After 2003, the first $500 per family in dividends would be excluded from taxable income. This provision is available to additional exclusions contained in the amendment. Up to $500,000 in capital gains on the sale of principal residence would be exempt from taxation. The proposal will extend the availability of Section 1202 that provides a 50 percent exclusion for capital gains on small business corporate stock held for at least five years.	HOUSE GEPHARDT Capital gains from sale of a family business or farm would be taxed at either 7.5 percent (for taxpayers in the 15 percent bracket) or 18 percent, up to a lifetime total of $600,00. This would not apply to publicly-traded stock, and the business would have to have been owned for three years to qualify for the lower tax rate. Up to $500,000 of capital gains on the sale of a home ($250,000 for singles) will be excluded from taxable income. Losses on the sale of a home up to $250,000 can be written off as ordinary deductions.	CLINTON PLAN Taxpayers could exclude 30 percent of their long-term gains from taxation. The top rate on capital gains would be reduced from 28 percent to 27.7 percent, and high income taxpayers would add the 30 percent back into taxable income to figure their Alternative Minimum Tax. Joint filers would get an exemption on gains from the sale of a primary home up to $500,000. Estimated cost: $7.1 billion over 5 years, $15.6 billion over 10.