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Lawmakers: Capital Gains Tax Break Would Be Retroactive

Congressional tax policy chairmen peg the date at May 7, 1997

WASHINGTON (AllPolitics, May 8) -- The chairmen of Congress' two tax-writing committees issued a terse statement on Tuesday saying planned reductions in the federal capital gains tax will be retroactive.

"We intend to propose that the effective date for any capital gains tax cut included in the budget reconciliation bill will be with respect to sales and exchanges occurring on or after today, May 7, 1997," wrote House Ways and Means Committee chairman Bill Archer (R-Texas) and Senate Finance Committee chairman William Roth (R-Del.)

"Interested parties should be advised that no specific provisions have been agreed upon and will only be finalized at the end of the legislative process."

Analysts said the move, timed with the close of the markets, was designed to ensure continued activity from investors who might otherwise delay transactions hoping for a lower rate.

"It is really necessary to backdate any changes in capital gains because you don't want market activity to come to a stop," DRI-McGraw Hill economist David Wyss told The Associated Press.

The Clinton Administration is not expected to oppose the Archer-Roth statement, though it is still possible the proposed reduction in capital gains taxes will fail in Congress. So far, only the White House and congressional GOP leaders have agreed to a lower rate as part of a deal to balance the federal budget by 2002.

Investors, however, are already reacting with intense interest to the prospect of lower rates, inundating brokerages with questions. "We've had more interest in this reform than anything I can remember in terms of tax reform," an estate planning analyst at the Private Bank at BankBoston told the AP.