Pete Domenici: “I rise today to introduce again legislation to eliminate one of the great inconsistencies in the Internal Revenue Code.…”

“I rise today to introduce again legislation to eliminate one of the great inconsistencies in the Internal Revenue Code. The bill I am introducing today with Senator Bennett is designed to restore some internal consistency to the tax code as it applies to art and artists. No one has ever said that the tax code is fair even though it has always been a theoretical objective of the code to treat similar taxpayers similarly. The bill I am introducing today would address two areas where similarly situated taxpayers are not treated the same. Internal inconsistency #1 deals with the long-term capital gains tax treatment of investments in art and collectibles. If a person invests in stocks or bonds, holds the asset for the requisite period of time, and sells at a gain, the tax treatment is long term capital gains. The top capital gains tax rate is 20 percent, 18 percent, if the asset is held for five or more years. However, if the same person invests in art or collectibles the top rate is hiked up to 28 percent. Art for art's sake should not incur an additional 40 percent tax bill simply for revenue's sake. That is a big impact on the pocketbook of the beholder. Art and collectibles are alternatives to financial instruments as an investment choice. To create a tax disadvantage with respect to one investment compared to another creates an artificial market and may lead to poor investment allocations.”