A recently released paper from the Congressional Budget Office gives important information on who owns capital gains assets, who realizes gains and who pays capital gains taxes.

Although more than 75 percent of capital gains accrue to families with annual incomes of $100,000 or more, the capital gains tax is not just a tax on the wealthy. As the report points out, the figures are inflated by including one-time capital gains -- such as from the sale of a farm or business -- so that a family of modest income will be counted as wealthy in the year the gain is realized. Even so:

• Nearly two-thirds of tax returns reporting capital gains are filed by people whose incomes are under $50,000 a year.

• More than 60 percent of taxpayers with capital gains had incomes under $50,000.

And older people account for a disproportionately large share of realized capital gains and the taxes paid on gains.

• People age 65 and older made up 12 percent of all taxpayers in 1993, but they realized 30 percent of total net capital gains and paid 30 percent of the tax on capital gains.

• Taxes on capital gains accounted for 7 percent of the income taxes paid overall, but 18 percent of the taxes paid by those 65 years old and older.

The capital gains tax affects businesses more than individuals.

• In 1993, the most significant investment assets that produced capital gains were the buildings and equipment that make up businesses -- nearly a quarter of all capital gains assets.

• Land and rental real estate constituted nearly one-fifth of capital gains assets.

• Shares of stock in publicly traded corporations accounted for only about 6 percent of capital gains assets, and mutual funds made up only about 3 percent.

Some taxpayers face a maximum effective capital gains tax rate higher than 28 percent.

• Taxpayers who have incomes of more than $200,000 may face effective tax rates of 29.2 percent because of the phaseout of itemized deductions.

• Some taxpayers face even higher tax rates because of other provisions, such as the partial taxation of Social Security benefits, which is phased in when income exceeds a threshold amount.

Source: CBO Papers, "Perspectives on the Ownership of Capital Assets and the Realization of Capital Gains," Congressional Budget Office, May 1997.

For Bruce Bartlett's analysis of this CBO report http://www.ncpa.org/oped/bartlett/june997.html