$1,500 to $2,000. $32,000 to $38,000. $38,000 to $44,000. $100,000 and over. 225 TABLE 4.-HOUSE BILL H.R. 13270, SINGLE PERSONS UNDER 35 RATES (EFFECTIVE 1972) TABLE 5.-HOUSE BILL H.R. 13270, SINGLE PERSONS 35 AND OVER RATES (EFFECTIVE 1972) TABLE 6.-TREASURY PROPOSAL, SINGLE PERSONS RATES (EFFECTIVE 1972) Secretary KENNEDY. We also have some very interesting figures here in summary form that I would like to discuss at this time. The point was made yesterday about changing the mix and that we were taking taxes away from the individuals and giving it to the corporations. I have some figures here on that which I think are very interesting. I think Senator Gore made the point, and I would like to just run through these, if I may. Senator WILLIAMS. Surely. Secretary KENNEDY. The division, under the present law, of taxes between individuals and corporations, is that individuals pay $77.9 billion, which is 69.4 percent of all income taxes. Corporations pay $34.4 billion or 30.6 percent of the taxes. Under the House bill individuals would pay $70.6 billion, 64.3 percent. Corporations would go up from $34.4 to $39.3 billion, or to 35.7 percent. Now, under our proposal individuals would pay $73.1 billion, which is 65.9 percent, and corporations would pay $37.9 billion or 34.1 percent. I thought those percentage figures would be of some interest. Under the House cuts, for example, the individual share is reduced from 69 percent down to 64 percent. The Treasury would put it at 66 percent. So it is not too far apart percentagewise. Mr. COHEN. Senator, I might say there are some tables at the back of my statement in the pamphlet as printed on page 90 and following. Senator WILLIAMS. I have seen those; yes. Mr. COHEN. They are our tables in general but we can supply additional ones. CAPITAL GAINS TAX Senator WILLIAMS. No. Under the bill as it came from the House, and also, Mr. Secretary, under your proposal, you increase the tax on capital gains features but, as I understand it you reduce the availability of capital losses; is that not correct? Secretary KENNEDY. That is correct. Senator WILLIAMS. Under existing law the individual can claim, of course he can offset his capital losses against capital gains in any amount, but if his capital losses exceed his capital gains he can write off up to $1,000 against his regular income. Now, as I understand it under the bill and under your proposal he can only write off one-half of that; is that correct? Secretary KENNEDY. He can still write off a thousand dollars but it would take $2,000 of a long-term capital loss to give him the $1,000 he could write off. Senator WILLIAMS. That is right; if he has only $1,000 loss he can only write off $500. Secretary KENNEDY. Yes; that is correct. Senator WILLIAMS. I was wondering since you are extending the tax as far as the gains are concerned if that $1,000 that you are cutting in half is realistic to give a man a chance. A fellow who is going to have capital gains next year is not worried too much whether he writes off a loss this year or carries it forward. But you do have some people who will go into the market for the first time in their lives, and they will get burned very severely, take a heavy loss, and so far as they are concerned they are never going in again. I think there should be some provision maybe for recovering this. I know that we provide almost an indefinite writeoff of this $1.000 but what would be the effect on revenue or the objections, if we raised that to an equivalent now to $2,000, if you write off a thousand, to raise that to, we will say $5,000 and let him write off up to the $2,500 or offset it in the same manner as your formula. Mr. COHEN. I can't give you the answer to that, Senator, but we have a study underway to determine what the revenue effect would be of increasing the thousand dollar limit to $2,000 or $3,000 or $5,000. To some extent it would be based upon an estimate as to what the effect would be in causing people to realize more losses than they now realize. But we are going to try to provide an estimate for the committee. Senator WILLIAMS. Yes, I wish you would. We have time here to deal with that and I am not suggesting a fantastic figure but I think that we have some built-in safeguards against being abused here in that under the rules they can only write off half of it anyway. Mr. COHEN. Yes. Senator WILLIAMS. Which is certainly different from existing law. Mr. COHEN. And certainly the $1,000 limit which I believe was put into the law in the early thirties at the time of the depression could now be raised to some higher amount in view of the inflation that has occurred since then. Senator WILLIAMS. Well, it is really reduced under this proposal because while an individual can write off up to a thousand dollars on that basis a married couple only gets half of it, each one five hundred apiece isn't it? Mr. COHEN. If they file separate returns. Senator WILLIAMS. Separate returns. Mr. COHEN. Yes; but if they file a joint return it will be the same limit as under existing law. Senator WILLIAMS. That is correct. Mr. COHEN. We rather think that permitting a deduction for only one-half of the losses is quite consistent with taking into income only one-half of the gains. Senator WILLIAMS. I am not quarreling with that feature. Senator WILLIAMS. I am not quarreling with you, but I am just wondering if we shouldn't recognize that when we extend that feature we are really cutting half of it down and maybe the figure, the thousand dollar figure should be likewise raised at some point somewhere so I would like to have the benefit of your estimates on it. Secretary KENNEDY. We will look into it, Senator, because that is worthwhile. Senator WILLIAMS. Yes. Just a couple of more minutes here. TAXING THE RICH There is considerable publicity given to the fact that the rich are not paying enough taxes. I certainly support and have long advocated the fact that everybody should pay his proportionate part of the taxes. I realize there have been some abuses under existing law where those some of us feel should pay taxes have been escaping and this bill is channeled in the direction of correcting those inequities. If we need further correction we are going to do it but at the same time I am wondering if there is not too much emphasis placed on that and too many people feeling getting the impression that all we have to do to solve the inflation problems of this Government, or raise the revenue is to put a higher tax upon the rich. In order to illustrate just how far we have gone on that, and just how unrealistic such proposals are, I am going to ask these questions: Assuming that individuals kept working just as hard as they are now for the benefit of turning all of the money over to the Federal Government, which we know is not a good assumption but on that assumption, how much extra revenue would you get if you put a hundred percent tax on every income above a hundred thousand dollars in America? Mr. COHEN. Well, they are now paying about $7.7 billion of tax; that is, the aggregate for all those who have adjusted gross income of more than a hundred thousand dollars. Senator WILLIAMS. Assume for the moment that you just completely confiscated the income of everyone in America earning over a hundred thousand dollars; how much extra revenue would we get? Senator CURTIS. I think Senator Williams means if the income that is in excess of a hundred thousand dollars. Senator WILLIAMS. That is correct; was confiscated. Senator CURTIS. The first $100,000 would be at present rates; you would get less than a billion dollars. Mr. COHEN. You would not increase the tax on the first $100,000. Senator WILLIAMS. No; leave it as it is but all over a hundred thousand just say turn it all over to the Government. Senator CURTIS. I think it is less than a billion dollars. Senator WILLIAMS. Would you put in the record Mr. COHEN. I certainly shall. Senator WILLIAMS (continuing). Just what you would get on the basis of a hundred thousand and on the basis of $50,000. I think it would be well to put in the record. Mr. COHEN. Yes, sir. Senator WILLIAMS. As I recall it it was around 400 to 500 million. Mr. COHEN. Well, I can understand that, Senator. There is about $19 billion of income in the aggregate by everyone who has more than a hundred thousand dollars of adjusted gross income. But if you exempted from that the first hundred thousand dollars it would be far less than that. Secretary KENNEDY. Pardon me. Senator CURTIS. I think it is less than a billion dollars. Secretary KENNEDY. That may be. Senator CURTIS. If you applied the same rule down to 25,000 you wouldn't have, you would have less than 4 billion. |