Two congressional committees, the House Ways and Means Committee and the Senate Finance Committee, recently held a join hearing to review capital gains taxes and their potential reforms.
At the moment, capital gains are taxed at a maximum of 15 percent. This is in contrast to 35 percent, the top rate at which ordinary income is taxed.
Reforming the U.S. tax system must include a thorough examination of capital gains’ rates to encourage growth, create jobs and reinvigorate the economy, according to Senate Finance Committee chairman Max Baucus, D-Mont. He believes the reform process should examine the capital gains rate in comparison with corporate income and dividends and individual wage income. He also says that many high-income individuals end up with a lower effective tax rate than middle class families because of the current capital gains tax rate.
Baucus queries whether it’s possible to lower wage income tax rates without increasing the capital gains rate. He also commented on the complexity of the tax code dealing with capital gains taxes.
Some at the hearing testified that capital gains tax rates were preferential and should not be continued. Others argued that increasing capital gains rates could discourage angel investing and other financial strategies that encourage the creation new businesses and jobs. Attendees also discussed the complexity of the capital gains issue and the difference between reform focused on generating revenue and reform geared toward boosting the economy.
For more information on how changes in capital gains tax rates may affect your business, contact a Beaton Accounting tax representative at 631-921-6894.
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