II

105TH CONGRESS

2D SESSION S. 2214

To amend the Internal Revenue Code of 1986 to reduce individual capital

gains tax rates.

IN THE SENATE OF THE UNITED STATES

JUNE 24, 1998

Mr. LOTT (for himself, Mr. COVERDELL, Mr. CRAIG, Mr. THURMOND, Mr.

COATS, Mr. INHOFE, Mr. STEVENS, Mr. GRAMM, Mr. MCCONNELL, Mr.

THOMAS, Mr. KEMPTHORNE, Mr. BURNS, Mr. CAMPBELL, Mr. HUTCHINSON, Mr. KYL, Mr. ABRAHAM, Mr. ALLARD, Mr. COCHRAN, Mr.

GREGG, Mr. SMITH of New Hampshire, Mr. GRAMS, Mr. ROBERTS, Mr.

THOMPSON, Mr. ASHCROFT, Mr. MACK, Mr. HAGEL, Mr. D’AMATO, Mr.

MCCAIN, Mr. BENNETT, Mr. FRIST, Mr. HATCH, Mr. GRASSLEY, Mr.

MURKOWSKI, and Mr. SESSIONS) introduced the following bill; which was

read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to reduce

individual capital gains tax rates.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Economic Growth Act

5 of 1998’’.
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1 SEC. 2. REDUCTION IN INDIVIDUAL CAPITAL GAINS TAX

2 RATES.

3 (a) IN GENERAL.—Subsection (h) of section 1 of the

4 Internal Revenue Code of 1986 is amended to read as fol5 lows:

6 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—

7 ‘‘(1) IN GENERAL.—If a taxpayer has a net

8 capital gain for any taxable year, the tax imposed by

9 this section for such taxable year shall not exceed

10 the sum of—

11 ‘‘(A) a tax computed at the rates and in

12 the same manner as if this subsection had not

13 been enacted on taxable income reduced by the

14 net capital gain,

15 ‘‘(B) 7.5 percent of so much of the net

16 capital gain (or, if less, taxable income) as does

17 not exceed the excess (if any) of—

18 ‘‘(i) the amount of taxable income

19 which would (without regard to this para20 graph) be taxed at a rate below 28 per21 cent, over

22 ‘‘(ii) the taxable income reduced by

23 the net capital gain, and

24 ‘‘(C) 15 percent of the amount of taxable

25 income in excess of the sum of the amounts on
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1 which tax is determined under subparagraphs

2 (A) and (B).

3 ‘‘(2) NET CAPITAL GAIN TAKEN INTO ACCOUNT

4 AS INVESTMENT INCOME.—For purposes of this sub5 section, the net capital gain for any taxable year

6 shall be reduced (but not below zero) by the amount

7 which the taxpayer takes into account as investment

8 income under section 163(d)(4)(B)(iii).’’.

9 (b) ALTERNATIVE MINIMUM TAX.—Paragraph (3) of

10 section 55(b) of such Code is amended to read as follows:

11 ‘‘(3) MAXIMUM RATE OF TAX ON NET CAPITAL

12 GAIN OF NONCORPORATE TAXPAYERS.—The amount

13 determined under the first sentence of paragraph

14 (1)(A)(i) shall not exceed the sum of—

15 ‘‘(A) the amount determined under such

16 first sentence computed at the rates and in the

17 same manner as if this paragraph had not been

18 enacted on the taxable excess reduced by the

19 net capital gain,

20 ‘‘(B) 7.5 percent of so much of the net

21 capital gain (or, if less, taxable excess) as does

22 not exceed the amount on which a tax is deter23 mined under section 1(h)(1)(B), and

24 ‘‘(C) 15 percent of the amount of taxable

25 excess in excess of the sum of the amounts on
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1 which tax is determined under subparagraphs

2 (A) and (B).’’.

3 (c) CONFORMING AMENDMENTS.—

4 (1) Paragraph (1) of section 1445(e) of such

5 Code is amended by striking ‘‘20 percent’’ and in6 serting ‘‘15 percent’’.

7 (2) The second sentence of section

8 7518(g)(6)(A) of such Code, and the second sen9 tence of section 607(h)(6)(A) of the Merchant Ma10 rine Act, 1936, are each amended by striking ‘‘20

11 percent’’ and inserting ‘‘15 percent’’.

12 (3) Section 311 of the Taxpayer Relief Act of

13 1997 is amended by striking subsection (e).

14 (4) Paragraph (7) of section 57(a) of such Code

15 (as amended by the Internal Revenue Service Re16 structuring and Reform Act of 1998) is amended by

17 striking the last sentence.

18 (5) Paragraphs (11) and (12) of section 1223,

19 and section 1235(a), of such Code (as amended by

20 the Internal Revenue Service Restructuring and Re21 form Act of 1998) are each amended by striking ‘‘18

22 months’’ each place it appears and inserting ‘‘1

23 year’’.

24 (d) TRANSITIONAL RULES FOR TAXABLE YEARS

25 WHICH INCLUDE JUNE 24, 1998.—
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1 (1) IN GENERAL.—Subsection (h) of section 1

2 of such Code (as amended by the Internal Revenue

3 Service Restructuring and Reform Act of 1998) is

4 amended by adding at the end the following new

5 paragraph:

6 ‘‘(14) SPECIAL RULES FOR TAXABLE YEARS

7 WHICH INCLUDE JUNE 24, 1998.—For purposes of

8 applying this subsection in the case of a taxable year

9 which includes June 24, 1998—

10 ‘‘(A) Gains or losses properly taken into

11 account for the period on or after such date

12 shall be disregarded in applying paragraph

13 (5)(A)(i), subclauses (I) and (II) of paragraph

14 (5)(A)(ii), paragraph (5)(B), paragraph (6),

15 and paragraph (7)(A).

16 ‘‘(B) The amount determined under sub17 paragraph (B) of paragraph (1) shall be the

18 sum of—

19 ‘‘(i) 7.5 percent of the amount which

20 would be determined under such subpara21 graph if the amount of gain taken into ac22 count under such subparagraph did not ex23 ceed the net capital gain taking into ac24 count only gain or loss properly taken into
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1 account for the portion of the taxable year

2 on or after such date, plus

3 ‘‘(ii) 10 percent of the excess of the

4 amount determined under such subpara5 graph (determined without regard to this

6 paragraph) over the amount determined

7 under clause (i).

8 ‘‘(C) The amount determined under sub9 paragraph (C) of paragraph (1) shall be the

10 sum of—

11 ‘‘(i) 15 percent of the amount which

12 would be determined under such subpara13 graph if the adjusted net capital gain did

14 not exceed the net capital gain taking into

15 account only gain or loss properly taken

16 into account for the portion of the taxable

17 year on or after such date, plus

18 ‘‘(ii) 20 percent of the excess of the

19 amount determined under such subpara20 graph (determined without regard to this

21 paragraph) over the amount determined

22 under clause (i).

23 ‘‘(D) Rules similar to the rules of para24 graph (13)(C) shall apply.’’.
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1 (2) ALTERNATIVE MINIMUM TAX.—Paragraph

2 (3) of section 55(b) of such Code (as amended by

3 the Internal Revenue Service Restructuring and Re4 form Act of 1998) is amended by adding at the end

5 the following new sentence: ‘‘For purposes of apply6 ing this paragraph for a taxable year which includes

7 June 24, 1998, rules similar to the rules of section

8 1(h)(14) shall apply.’’.

9 (e) EFFECTIVE DATES.—

10 (1) IN GENERAL.—Except as otherwise pro11 vided in this subsection, the amendments made by

12 this section shall apply to taxable years beginning on

13 or after June 24, 1998.

14 (2) TRANSITIONAL RULES FOR TAXABLE YEARS

15 WHICH INCLUDE JUNE 24, 1998.—The amendments

16 made by subsection (d) shall apply to taxable years

17 beginning before such date and ending on or after

18 June 24, 1998.

19 (3) WITHHOLDING.—The amendment made by

20 subsection (c)(1) shall apply only to amounts paid

21 after the date of the enactment of this Act.

22 (4) CERTAIN CONFORMING AMENDMENTS.—The

23 amendments made by subsection (c)(5) shall take ef24 fect on June 24, 1998.

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