The reduced capital gains tax rate embodied in the tax plan emerging from the House Ways and Means Committee will shift economic incentives in a positive direction, according to tax experts.

The individual tax rate on capital gains would be reduced from 28 percent to 20 percent for couples making more than $41,200 a year, and to 10 percent for couples making less. The plan also cuts the corporate capital gains rate to 30 percent from 35 percent, and cuts taxes on gains from the sale of a house.

• Under the new rates, once a company has paid the new 30 percent rate on $1 of profits resulting from capital gains, it passes 70 cents along to the investor as a dividend.

• That 70 cents is still subject to the personal rate of 39.6 percent, leaving the investor 42.28 cents -- an 8 percent increase from the straight dividend method.

• But if the company chooses to pass along its profits in the form of capital gains by retaining the earnings, the shareholder will get 65 cents.

• Under the new lower rate of 20 percent, the 65 cents will net the investor 52 cents after tax -- an 11 percent increase.

An even better scenario results when a company passes profits derived from capital gains to investors in the form of increased share value instead of dividends. This nets the investor 56 cents.

The plan would also let individual investors index the value of their gains to inflation on assets held at least three years.

Source: Perspective, "A Capital Idea," Investor's Business Daily, June 13, 1997.