Congress Plans Hearing on Reforming Capital Gains Taxes
Leaders of the Senate and House committees charged with tax policy plan to hold a rare joint hearing next Thursday on tax reform and the tax treatment of capital gains.
House Ways and Means Committee chairman Dave Camp, R-Mich., and Senate Finance Committee chairman Max Baucus, D-Mont., said Friday that the committees will hold a joint hearing June 28 to review the tax treatment of capital gains in the context of comprehensive tax reform. Both committees have been holding a series of hearings on tax reform since last year, in most cases separately. They occasionally hold a joint hearing on matters of wide interest.
“The taxation of capital gains is one of the most widely discussed areas of our individual tax system, and it needs to be reviewed as part of comprehensive tax reform,” said Camp. “With both the Ways and Means Committee and the Senate Finance Committee actively pursuing tax reform, it will be critical for Congress’s two tax-writing panels to continue working together closely. I look forward to having our two committees once again convene a joint hearing on tax reform for the third time this Congress to consider the issues surrounding the capital gains tax.”
The maximum capital gains tax rate currently is 15 percent, compared to the maximum individual ordinary income tax rate of 35 percent. Unless Congress acts by the end of the year, however, the maximum statutory capital gains rate will increase to 20 percent on Jan. 1, 2013, while the maximum individual ordinary income tax rate will increase to 39.6 percent.
On top of that, beginning in 2013, an additional 3.8 percent tax will be imposed on net investment income earned by certain individuals. Net investment income includes, among other items, capital gains. Furthermore, the 2013 scheduled restoration of the “Pease limitation” on itemized deductions will impose a roughly 1.2 percent marginal rate on capital gains, bringing the top federal rate on capital gains to 25 percent in 2013.
“It has been more than 25 years since the last major tax reform occurred. The world has changed drastically in that time and America’s Tax Code hasn’t kept up,” said Baucus. “It’s time we had a tax code for the 21st century, one that can create jobs, spark innovation and expand opportunity. I look forward to working with Chairman Camp as we work on a balanced, common-sense plan to reform the Tax Code and create the jobs we need to improve our economy.”