More taxpayers who aren't rich are declaring capital gains - (the profit when a financial asset or real estate is sold). Thus to an increasing extent, the benefits of a capital gains tax cut would go to lower and middle income groups. Taxpayers of more modest means have been investing in mutual funds - and individual stocks and bonds - at a fierce pace in recent years, according to studies by the Investment Company Institute.

• Last year, net assets of equity mutual funds (which buy shares of corporations) totaled $1.27 trillion - compared to only $117 billion ten years earlier.
• And bond and income funds have skyrocketed from$135 billion in net assets to $798 billion over the same period.
• Since the typical mutual fund shareholder has an annual income of $60,000 - with only one-third having incomes above $75,000 - these investors are solidly middle-class.

Middle income families also invest in individual stocks.

• About one-third of families with incomes between $50,000 and $99,000 owned stocks in 1992.
• In the $25,000 to $49,000 annual income group, 18 percent invested in stocks in 1992.

The most widely-owned asset that creates capitla gains across all incomes classes is the home, according to Federal Reserve data. Most households in each income class - with the exception of those making less than $10,000 a year - owned a home in 1992.

One problem in examining investment ownership on the basis of household income is that profits from the investments, themselves, help boost the income figures.

Heritage Foundation economist William Beach has found that if the benefits of capital gains are subtracted from income reported by taxpayers in any given year, the benefits spread. Looking at 1992, he found that only 34 percent of all capital gains were reported by households with an income of $200,000 or more - once the income effect of the gains was taken out.

So figures demonstrate that high capital gains tax rates soak middle class households as well as more wealthy ones. Under candidate Bob Dole's proposal to reduce capital gains tax rates, the rate for those earning below $40,100 a year would dip from 15 percent to 10.5 percent.

Source: Laura M. Litvan, "Are Cap-Gains Cuts for the Rich?" Investor's BusinessDaily, September 5, 1996.