Letter to the Co-Chairs of the Joint Select Committee on Deficit Reduction from Debt Reduction Task Force Co-Chairs Domenici and Rivlin

“As was stated in the hearing, all of the witnesses, and indeed all of the members of the BPC Debt Reduction Task Force, concluded that both increased revenues and outlay cuts will be necessary to contain the nation’s rising public debt. Because the Task Force recognized that fact, we spent considerable time developing a fundamental tax reform package, which we believe would meet three essential criteria: increase revenue, stimulate economic growth, and distribute the additional burden according to the ability to pay. To achieve all three goals, we determined that it would be essential to eliminate the current preferential tax treatment of capital gains.

“Fortunately, we have a precedent for our recommendation. The Tax Reform Act of 1986, passed by a Republican Senate and a Democratic House and signed by President Ronald Reagan, eliminated the tax preference for capital gains and reduced the top-bracket individual income tax rate to 28 percent. The Task Force proposal is quite similar.”