NEW YORK (CNNfn) - A Republican proposal that would lower the maximum amount of capital gains tax to 15 percent was announced by the chairman of the House Ways and Means Committee Wednesday.
Rep. Bill Archer, R-Tex., unveiled a package which would also lower the capital gains rate for taxpayers in the lowest income tax bracket to 7.5 percent from 10 percent.
The maximum tax on capital gains (what an investor receives after selling a stock or other securities held for 12 months or more) would drop from 20 percent to 15 percent retroactively effective July 1, 1999.
Archer said the rate reductions would be included in broader legislation expected to cut taxes by $800 billion to $900 billion over 10 years.
On its own, the capital gains rate cut would cost $50 billion, according to a preliminary estimate.
Democrats accused Archer of crafting a tax plan that would cater to big business and the rich, at the expense of the poor, and said President Bill Clinton was certain to veto the bill.
"This is a huge tax cut that, for the most part, would go to people who need it the least," said Dan Maffei, spokesman for Democrats on the Ways and Means Committee. "At a time when our economy is booming, there is no need to do this sort of radical capital gains cut."
Republicans argue that cutting capital gains tax rates will keep the U.S. economy strong, and benefit a wide range of Americans who invest in the stock market.
According to the Congressional Research Service, the number of Americans who own stock is at a high of nearly 84 million, a 170 percent increase since 1970.
The last time Congress cut the capital gains rate was 1997, from 28 percent to 20 percent and from 15 percent to 10 percent. Income tax revenues to the federal government have risen steadily since that time, Archer said.
Some economists believe that the tax cut could raise revenue in the near term by prompting investors sitting on profits to sell.
-- from staff and wire reports