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Businessweek Archives

Capital Gains: The President Gives A Little


Washington Outlook

CAPITAL GAINS: THE PRESIDENT GIVES A LITTLE

After taking heat from both congressional Democrats and the high-tech industry for the niggardly capital-gains proposal in his economic plan, President Clinton is ready to sweeten the pot just a bit. But the benefits will still be restricted to modest gains in small companies.

The February proposal would have cut in half the taxes on capital gains from the sale of assets held for at least five years. But it was limited to individual investors in companies with paid-in capital of $25 million or less. And only profits of $1 million or 10 times the original investment would qualify.

The techies and some Hill Democrats favor a version proposed by Senator Dale L. Bumpers (D-Ark.) and Representative Robert T. Matsui (D-Calif.). They would grant the tax break for investments in companies worth up to $100 million. Administration sources say that Clinton may now split the difference to include investments in $50 million companies and gains of up to $10 million. But the White House still resists allowing tax-free gains on long-term investment in the smallest companies. Backers of the Bumpers-Matsui plan are mystified over Clinton's unwillingness to accept the relatively inexpensive proposal. "This was a bold initiative," says one congressional capital-gains fan. "But he cheaped out." Edited by Stephen H. Wildstrom; Howard Gleckman


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