By Albert, Andrew
American Banker , Vol. 150
NEW YORK -- Securities industry officials Wednesday voiced immediate satisfaction with a provision of President Reagan's tax plan that would lower the levy on their customer's capital gains. But they seemed determined to fight a companion proposal to eliminate tax-exempt status for most private-purpose municipal bonds.
Accountants and industry officials interviewed Wednesday said they had not yet determined whether the tax blueprint would prove to be a net winner for securities firms.
For the moment, though, the big brokerage houses are content with the lower capital gains rates and other savings and investment incentives in the President's proposed overhaul of the federal tax code.
The brokerage industry was particularly pleased that the administration would continue to draw the distinction between ordinary income and income earned through long-term investments (realized after six months). Under the Reagan plan, long-term capital gains would be taxed at a maximum rate of 17.5%, down from the current top rate of 20%.
The brokerage industry has for years viewed the capital gains distinction as a precious tax break that encourages individuals to invest in the stock market.
"This measure, together with lower tax rates, will provided needed incentives for savings and investments, an essential ingredient of a healthy economy," said William A. Schreyer, chairman and chief executive officer of Merrill Lynch & Co., the nation's largest brokerage firm.
But not all brokerage executives believe that a slight capital gains break can bring a significant number of individuals back into the stock market. Robert Stovall, a senior vice president at Dean Witter Reynolds Inc., said the lower capital gains tax "might stimulate individual trading activity a bit, but I don't think the last capital gains cut had too much impact." He was referring to an earlier drop in the capital gains rate to the current 20% level from 25%.
The White House tax proposal, delivered to Congress Wednesday, would lower the taxable share of a capital gain to 50% from the current 60% and reduce the individual tax rate to 35% from the current 50% rate for those in the top bracket. …