Niraj Chokshi contributed to this report.
The House Ways and Means Committee and Senate Finance Committee held a joint hearing today on the possible role capital gains can play in tax reform.
It was the third meeting between the two committees (before that they hadn't met together for tax related hearings in 70 years), but if the attempt was to show bicameral or bipartisan cooperation, it may have come up short. The staid hearing may have been without bickering, but both Republicans and Democrats stuck to their respective corners.
Chairman of the House Committee Rep. David Camp, R-Mich., said that capital gains deserve to be kept at a lower rate because in a sense they are often subject to a "double layer of taxation."
"In the case of shares of stock, a company's income is first taxed at the corporate rate," he said. "Then, when shareholders of the company later decide to sell their stock, they are subject to capital gains tax on the sale." His point was that the stock's value was already reduced by the fact that the company had already lost some value due to paying some of its earnings in taxes.
It was an argument that Chairman Sen. Max Baucus, D-Mont., addressed in his opening statement as well.
"Most of the time that claim doesn't prove true," he said, noting that only a third of capital gains come from sales of corporate stock. Baucus said there were several reasons to consider upping the capital gains tax rate from its current top level of 15 percent, but what it really came down to was an issue of equality.
"Last year, capital gains represented half the income of the top .1 percent of earners, but 3 percent for the lowest 80 percent of taxpayers," he said. "Low capital gains rates are the main reason why many wealthy individuals pay lower tax rates than middle class families."