Congressional Republicans strongly oppose tax increases and instead want broad tax cuts. They favor not only cutting income taxes but also a further reduction of estate taxes and a less-onerous marriage penalty.
Rep. Bill Archer (R-TX), chairman of the House Ways and Means Committee, wants to change a major provision in last year's tax law concerning capital gains taxes. Specifically, he wants to reduce the holding period necessary for investments to qualify for long-term capital gains treatment from 18 months to one year.
Under the 1997 law, gains on investments held for 12 months or less are taxed as ordinary income; gains on investments held for more than 12 months and up to 18 months are generally taxed at a 28 percent capital gains rate; and gains on investments held longer than 18 months are taxed at a maximum long-term capital gains rate of 20 percent. For individuals in the 15 percent income tax bracket, the rate is only 10 percent. Archer says the change would help simplify last year's tax law.
While the Republicans are talking about doing away with the existing tax code by 2001, little action is expected on such an agenda this year. For now, the GOP strategy is to pursue broad tax cuts and to continue discussing a major tax simplification plan for the future. It's not clear what new system would take the place of the existing tax code, since some Republicans want to establish a national sales tax on goods and services at the time of purchase, while others support a flat tax.