Why not a permanent capital-gains tax credit?

The needs of our economy for capital investment during the next few years cannot be overemphasized. If the challenges of greatly increased foreign competition are to be met, and if domestic problems are to be solved, a tax structure must be developed that will encourage corporations and individuals to accumulate and invest capital.

Republicans and Democrats both recognize the importance of incentives for capital investment to create jobs and promote economic growth and productivity; however, neither party can reach agreement on how to achieve this goal. The Republicans prefer a permanent capital-gains tax cut; the Democrats prefer a temporary investment tax credit.

The solution is simple: combine the two ideas into a permanent capital-gains tax credit. With a permanent capital-gains tax credit, the capital gain will be exempt from any taxation if the entire gain is invested in land, buildings, or fixed assets (production equipment or pollution control facilities) within twelve months before or after sale.

In addition, the capital gain will be exempt from any taxation if the entire gain is invested in research and development, education and training, and health and safety within twelve months before or after sale. If the entire gain is not invested within twelve months before or after sale, the entire capital gain will be taxable at ordinary income-tax rates.

We need to encourage corporations and individuals to accumulate and invest capital. The capital-gains tax credit will offer all Americans the benefits of a productive and more competitive economy.