CAPITAL GAINS TAX CUT COLLECTS LOCAL SUPPORT

The scenario is simple.

A couple purchases a farm in 1980 for $60,000. Twelve years later, they sell the farm for $120,000.

The Internal Revenue Service says the couple owes them $16,800.

The Smiths bought stocks 20 years ago for $22 a share. Last year they had a chance to sell their 1,000 shares for $47.20 a share.

They didn't sell.

The deal would have resulted in a profit of $25,200 over 20 years on the purchase, but the IRS would have taken $7,056 of it.

In both instances, the IRS share represents the capital gains tax, the tax on profits from the sale of stock, real estate and other assets.

President Bush has proposed a cut in the capital gains tax rate in his economic package. He wants Congress to cut the tax by March 20.

Bush's first proposal was to cut the rate from its current 28 percent to 19.6 percent for assets held three years, but later he suggested the cut be a 15.4 percent rate for assets held one year.

Democrats have attacked Bush's plan, saying that 85 percent of the benefits would go to people making more than $50,000 a year.

"I think the cut in capital gains would be important to a lot of people," said John R. Janssen, a certified public accountant with the firm of Earley, Janssen, Begley & Company, 2103 Themis in Cape Girardeau. "Many people would benefit, especially people who do want to sell a farm, home, or stocks."

Janssen added that the lower capital gains tax might spur people to sell these things.

"A lot of people put off selling items," he said. "I think, with a lower capital tax, that there would be more turnover of property and investments, which would be beneficial to the economy.

"The current maximum of the tax is 28 percent," he added. "They're talking about rates of 15.4 (percent). I would be satisfied to see even a 20 percent rate."

Joe Domian also uses the farmer as a prime example of the capital gains tax law.

"I have seen people put their blood, sweat and tears into a farm they paid $100 an acre for," said Domian, stock investment broker with Edward D. Jones & Co. investment firm, 1749 Independence. "Today, that farm may be worth $1,400 an acre, and they are ready to sell."

But, they will have to pay a tremendous capital gains tax, points out Domian.

"That tax won't take inflation into consideration," adds Domian. "A lot of the profit from the farm would be eaten up by inflation."

Domian points out it doesn't have to be a farm.

"A lower capital gains tax will help a lot of `mom and pop' businesses restaurants, cleaners, and others," he said. "These are not rich people."

U.S. Rep. Bill Emerson (R-Cape Girardeau) discussed the capital gains tax during a recent visit to Cape Girardeau.

"I don't like the rhetoric that the capital gains cuts have only to do with favoring the president's rich cronies," Emerson said during a recent talk to the Cape Girardeau Lions Club.

"I don't think we have that many extremely wealthy people in the 8th Congressional District. If we do, I haven't heard from them on the subject of capital gains tax," he said.

But, Emerson said that over the years he had heard from hundreds of farmers and owners of small businesses, and other property owners, who favor a cut in the capital gains tax.

"I think it would be an economic stimulus that is much needed," said Emerson, adding that middle-class Americans would benefit most from a cut in the tax. "It would increase jobs and help just about everyone."

"It would be a break for many middle class people," said Steve Schneider, investment broker with A.G. Edwards & Sons, 97 N. Kingshighway. "Besides helping people with farms and property to sell, it would help people who have stock investments."

Schneider said many people who have stocks and real estate want to sell those properties.

"It would create more selling activity, which in turn would boost the economy," he said.