Former GOP vice presidential candidate Jack Kemp is imploring the President and Congress to take the advice of Federal Reserve Chairman Alan Greenspan to abolish capital gains taxes.

• In testimony before Congress, Greenspan has said that "the appropriate capital gains tax rate is zero."

• In his view, the tax is "a poor means of raising revenue" and repealing it would encourage "productivity-increasing investments."

• At the very minimum, Kemp wants the top rate cut from 28 percent to 14 percent, and to zero for urban enterprise zones like the District of Columbia.

• Moreover, all future capital gains should be indexed for inflation, and for two years capital gains that already have been accrued should be indexed back to the date of the asset's acquisition.

By some estimates, such reforms would unlock about $5 trillion in capital gains -- of which perhaps three-quarters are purely inflationary. The funds could go for new investments, if the owners could sell these presently locked-up investments without having to pay $1 trillion in taxes due to inflated profits.

Unlocking real gains would increase federal revenues by an estimated $150 billion.

The flood of new capital would energize the nation's economy -- which, since the end of the 1990-91 recession, has experienced the slowest expansion in more than a century.

Halving the current rate and indexing gains would spur assets to appreciate on the order to 19 percent to 20 percent -- adding perhaps 1,300 points to the Dow Jones Industrial average.

Source: Jack Kemp, "Greenspan Is Right: Abolish Capital Gains Taxes," Wall Street Journal, February 24, 1997.