KINDER'S COMMENTARY: CUT IN CAPITAL-GAINS TAX COULD FREE FUNDS, STIMULATE STOCKS

One antidote to the summer swelter is the thought of another reduction in the rate of taxation on capital gains. Moving through Congress in both the House and Senate tax bills is a reduction in the capital-gains tax to 15 percent from 20 percent. Remember, this is the one tax the payment of which is optional: You don't pay it until you sell an appreciated asset (one that has gained in value during your ownership), and then you pay the tax on the gain -- the amount by which your sale price exceeds your original acquisition price. The latter is what the tax specialists call your basis in the asset.

Indeed, it is this very optional nature of the capital-gains tax that makes lowering this rate lead to higher revenue: Lowering the rate induces more people to sell appreciated assets, releasing capital that has been locked up by the higher tax rates.

There's more good news: House Ways and Means chairman Bill Archer advocates making any rate reduction retroactive to July 1.

As usual, Robert Novak has done some of the best reporting. From a July 5 column, in which Novak discusses the opposition of former Treasury secretary Robert Rubin's opposition to lowering this crucial tax rate:

"The study by Standard & Poor's DRI service confounds the Clinton administration's bias that survives Rubin's departure. It found that the bipartisan 1997 Hatch-Lieberman cut in the capital gains rate from 28 percent to 20 percent lowered capital costs for new investment, promoted start-up businesses and entrepreneurism, helped elevate stock prices and made life better for the ordinary American."

Still another study has demonstrated a direct link between the rising stock market and lower rates of capital-gains taxation. This one suggested that as much as a third of the stock market's rise since the 1997 rate reduction is attributable to the lower tax rate.

Back to Novak, describing the DRI study:

"* The 1997 cut reduced net capital cost by about 3 percent. Fixed investment will go up 1.5 percent. The result: a productivity increase of 0.4 percent over 10 years.

"* The capital gains cut raises household income by $309 and the average worker's by $250 by 2007, thanks to a boost in productivity.

"* The capital gains tax cut should encourage more people to become entrepreneurs -- especially in high-tech enterprises.

"* The stronger growth in the economy adds to federal revenues over the long run. ... The stronger economy and resulting higher personal and corporate incomes will raise receipts."

Novak concludes: "The zero capital-gains tax rate long advocated by Federal Reserve Chairman Alan Greenspan is the ultimate goal, but a reduction to even 15 percent would make a good economy even better."

Against all this good sense we have the Democratic demagoguery about "tax cuts for the rich." But does it even need to be said? The rich have already realized their capital gains. They're already rich! It is precisely those of us who would like to accumulate a nest egg for retirement or start up a new business who are desperately in need of lower taxes on capital gains. And the poorer you are, the more you need these lower rates.

What is encouraging, over the long haul, is how many Americans are becoming more and more financially savvy, how many are investing in the stock market either directly or through a retirement plan, preparing for the day when they won't need their self-styled liberal protectors.

~Peter Kinder is assistant to the president of Rust Communications and a state senator from Cape Girardeau.