TABLE OF CONTENTS 1. Tax rate reductions (pp. 40, 75, 506)- 2. Five-percent floor on itemized deduc- tions (pp. 47, 104, 226, 622, 676)__ 1. Group term insurance (pp. 50, 108). 2. Sick-pay exclusion (pp. 50, 107). A. Thumbnail sketch and C. Explanation of administration III. Taxation of capital gains.. 1. Individuals (pp. 53, 126, 365) - 2. Corporations (pp. 53, 127, 365)_. B. Gains accrued on capital assets at time of gift or death (pp. 54, 128, 592)..... C. Stock options (pp. 56, 147, 459)- D. Sale or exchange of real estate (pp. 57, 140, 2. Lump-sum, profit-sharing, and stock- bonus payments (pp. 58, 148, 499). 5. Capital gains from farming (pp. 58, 7 SUMMARY OF TAX MESSAGE A. THUMBNAIL SKETCH OF ADMINISTRATION PROPOSALS (Page references are to Secretary Dillon's general statement, technical explanation, and special exhibits in this order, as they appear in pt. I of Ways and Means Committee "Hearings on the President's 1963 Tax Message") I. INDIVIDUAL ORDINARY INCOME TAXES A. TAX RATES AND RELATED MATTERS 1. Tax rate reductions (pp. 40, 75, 506) Over 3-year period reduces bottom rate from 20 percent to 14 percent (also splits this bracket) and top rate from 91 percent to 65 percent. Makes corresponding changes in other tax brackets. 2. Five-percent floor on itemized deductions (pp. 47, 104, 226) Limits total itemized deductions to amounts in excess of 5 percent of taxpayer's adjusted gross income. 3. Minimum standard deduction (pp. 42, 84, 193) Provides minimum standard deduction of $300 for taxpayer plus $100 for each dependent, including a spouse (maximum of $1,000). B. TAX TREATMENT OF OLDER PERSONS (PP. 44, 87, 209) Substitutes $300 tax credit for those over age 65 for present $600 additional exemption from income and present retirement income credit. C. DIVIDEND CREDIT AND EXCLUSION (PP. 51, 113, 246) Repeals 4-percent dividend credit and $50 dividend exclusion. D. ITEMIZED DEDUCTIONS 1. Borrowing to buy life insurance and split-dollar insurance (pp. 51, 110, 112) Denies a deduction for interest payments where there is a systematic plan to borrow to pay any substantial number of the premiums on a life insurance policy and treats as income of the employee the interest on any funds put up by the employer (cash surrender value of a policy) to buy life insurance for the employee. 1 2. Four-percent floor for casualty losses (pp. 49, 105) Limits deductible casulty losses to those in excess of 4 percent of taxpayer's adjusted gross income. 3. Charitable contributions limitation (pp. 46, 99) Increases maximum charitable contributions deduction from 20 percent to 30 percent for all contributions except those to private foundations. 4. Unlimited charitable contribution (pp. 49, 106, 242) Removes from existing law the provision that permits the deduction of cbaritable contributions without limitation in those cases where contributions plus taxes equalled 90 percent or more of income in last 8 out of 10 years. 5. Medical expense deduction (pp. 46, 100) Substitutes a 4-percent floor on medical expenses generally for the separate 3-percent floor on such expenses and the 1-percent floor on drugs, removes the ceilings on medical expenses, and revises the definitions of certain deductible medical expenses. 6. Child-care deduction (pp. 43, 86, 202) Liberalizes child-care deduction by raising the maximum deduction from $600 to $1,000, by raising from $4,500 to $7,000 the maximum earnings a working wife and her husband may have and still claim the full child-care deduction, by increasing from 11 to 12 the maximum age of children which may qualify a taxpayer for this deduction, and by making certain other modifications in the provisions. 7. Moving expenses (pp. 45, 96) Permits the deduction of moving expenses of new as well as old employees, of nonreimbursed expenses as well as those reimbursed and defines moving expenses. 8. Travel expenses (p. 98) Provides specific rules for deduction of transportation expenses when outside "duty area" on business, and for deduction of meals and lodging while away from duty area more than 16 hours and makes certain other modifications. E. EXCLUSIONS 1. Group term insurance (pp. 50, 108) Limits employee's exclusion for premiums on group term insurance furnished by employer to premiums paid for first $5,000 of coverage. 2. Sick-pay exclusion (pp. 50, 107) Eliminates wage continuation exclusion of up to $100 a week for those who have been hospitalized or are sick more than 1 week. F. AVERAGING (PP. 45, 89) Provides equivalent of averaging of income over a 5-year period where income in current year exceeds average of 4 prior years by more than one-third and this excess equals at least $3,000. |