Taxing the Rich: The Capital Gains Tax

The two speakers presented their views on capital gains tax legislation in a debate format. The question was: Should capital gains be the subject of the same taxation as ordinary income? From the 1920s through 1986 with the passage of the Tax Reform Act, capital gains were taxed at a rate lower than ordinary income. Proponents of a capital gains differential, as represented by Richard Lesher, contend that a reduction of the tax will stimulate economic growth, create new jobs, and encourage new capital formations and increase federal revenue. Opponents, as represented by Rep. Dorgan, argue that restoration of the differential will decrease federal income, require federal spending cuts and primarily benefit the wealthy. In his proposed budget for next year, Pres. Bush has proposed that the first thirty percent of an individual's capital gains be excluded from taxation by 1993. It is currently forty percent.