Hi Paul, some details on Capital Gains cuts..
CAPITAL GAINS:
The Budget agreement announced last night included a cut in Capital Gains Taxes from 28% down to 18% if the assets held for five years or more, and 20% for assets held for less than five years. For couples with incomes below $41,200, the capital gains taxes will be cut to 8% and 10% percent. Indexing to compensate for inflation was lost in the negotiations.
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Here's the entire summary of the budget agreement.
Budget Agreement Provides $500 per child tax credit and Capital Gains Tax Cut
by: Mary Mostert,
An Agreement was reached last night between Congressional Republicans and Clinton Administration on Balancing the Budget and a $500 per child tax credit, both major goals of the Contract With America, which President Clinton vetoed in 1995 and 1996.
"We have reached tentative agreement with the administration on the balanced budget ... and tax cut package that is pending review of the statutory language," Senate Majority Leader Trent Lott told a hurriedly assembled news conference.
Lott, accompanied to the microphones by Senate Budget Committee Chairman Pete Domenici, said he expected that review to be completed by Tuesday with legislation going to the House and Senate floors later in the week.
The provisions of the Budget Agreement are remarkably similar to provisions Clinton vetoed previously and include:
TAX CREDITS FOR CHILDREN: $500 per Child Tax Credit, first introduced as the American Dream Restoration Act in HR 1215 in the first 100 days of the 104th Congress, was vetoed by Clinton when it was finally passed in both the House and Senate as a provision of the Seven Year Balanced Budget Act, HR 2491. HR 2491 was vetoed December 6, 1995, which precipitated the Government Shut-down.
The $500 per child tax credit, which produced the largest savings of HR 2491, was the provision which Democrats used in 1995 and 1996 as the "huge tax cut for the wealthy."
The President agreed to the Republicans' position: a credit for each child up to age 17, phased out for couples with incomes of $110,00. Clinton wanted the credit only through age 13 and would phase out the credit at $60.00
CAPITAL GAINS: The Contract with America Job Creation and Wage Enhancement Act, HR 9, was designed to create incentives for Small Business, a capital gains cut and indexation, neutral cost recovery, risk assessment/cost-benefit analysis, strengthen the Regulatory Flexibility Act and unfunded mandate reform to create jobs and raise worker wages. It was passed as part of HR 2491, which Clinton Vetoed.
The Budget agreement announced last night included a cut in Capital Gains Taxes from 28% down to 18% if the assets held for five years or more, and 20% for assets held for less than five years. For couples with incomes below $41,200, the capital gains taxes will be cut to 8% and 10% percent. Indexing to compensate for inflation was lost in the negotiations.
Sen. Phil Gramm, who pushed for indexing, said: "I never expected to get indexing. I'm not surprised we eventually traded it off."
WELFARE: The Welfare Reform Package, which was finally passed last year after being vetoed twice by Clinton, was modified by requiring Local Governments to pay minimum wage in workfare programs, a provision the Democrats demanded. Republicans also agreed to restore disability benefits to many legal immigrants and to continue Medicaid coverage for children who lose disability benefits.
INHERITANCE TAXES: Another Contract with America goal was the exemption for family farms and businesses from inheritance tax that often destroyed family businesses. The budget agreement would increase to $1.3 million immediately from the current $600,000. On other estates, the exemption would rise to $1 million after 10 years.
MEDICARE CUTS: Most of the approximately $140 billion in five-year savings came from Medicare, whose growth would be trimmed by $115 billion, or about 12 percent. Most Medicare savings would come from reducing payments to hospitals and other health-care providers, though the current $43.80 monthly premium for coverage of doctors' bills would grow slowly. In a practical sense, the reduction of payments to hospitals and other health-care providers will undoubtedly increase the cost of medi-gap insurance, which most seniors carry. Medicare alone makes it difficult in some areas to even find a doctor willing to accept Medicare payment. When the payment for Medicare is reduced, it will require private insurance carriers, like Blue Cross, to increase their premiums to pay for the remaining bill.
This cleverly achieves pretty much the same goal, reducing Medicare Costs, while merely allowing market forces to take care of the Medical squeeze in which even current Medicare payments fail to cover costs to hospitals and doctors.
The Senate approved Medicare plans that House Republicans objected to would have angered elderly voters. They would have boosted premiums for higher-income recipients, gradually increased the eligibility age from 65 to 67, and charged $5 for each visit by home health workers.
Other provisions of the agreement include:
TOBACCO TAXES The Federal tobacco tax, now 24 cents, would increase by 10 cents a pack in 2000 and another five cents in 2002. President Clinton wanted a 20 cent a pack increase. The Senate passed that, but the House wanted no increase in tobacco taxes. The 10 cents a pack increase is a compromise.
CHILDREN'S HEALTH: The most expensive new provision of the Budget Agreement expands health care coverage for children which will cost $24 billion. That is $8 billion more than the Republicans wanted to spend and they also compromised over how much power the states should have in deciding what services would be provided. The Tobacco Tax increase is supposed to offset this increase.
EDUCATION: The Budget Agreement also provides a $1,500 scholarship for each of the first two years of college for middle income families.
It is expected that the budget agreement will receive bi-partisan support in the Congress and pass by comfortable margins in both houses of Congress. While both liberals and some conservatives may vote against it, the "Blue Dog" Democrats and moderate Republicans are expected to enthusiastically endorse it, which will give it the necessary votes.
About half the Senate's 45 Democrats are expected to support the package, making passage sure. Filibusters are barred on budget measures like these, and once the details are settled and the plan is printed, both houses could pass it this week before going on a month's vacation.
The Tax Credit for children would be $400 in 1998, rising to $500 the next year, for children 16 and under. It would apply to many families who earn as little as $18,000 and owe little or no income tax and it would also go to single parents making as much as $75,000 and couples making $110,000, which Republicans wanted.
In a break for most homeowners, there would be no capital gains tax on home sales in which the profit was below $500,000.
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Regards, Michael |
