Capital Gains Tax Isn’t Cut-and-Dried

I agree with Tom Petruno (“Do We Really Need a Gains Tax Cut? In the Long Term, Yes,” Market Beat, May 11) that we need a capital gains tax cut. However, there are two kinds of gains: those that generate economic activity and those investments in stock or land or real estate or whatever that simply sit around and wait for them to appreciate over time. The latter should not be awarded a tax cut. The former should be given a low rate or perhaps a large deduction before any tax is levied.

It seems to me quite feasible to draw a fairly precise boundary between these two. Broadly the former category would include:

* Family-owned farms and businesses.

* The stock or partnership interests of original investors in an enterprise.

* New issue stock sold by a corporation to raise capital. This would require a little record keeping. Buyers of new issue would be given the serial numbers of their certificates. Those numbers would be cited to IRS when they sold the stock, and the IRS would have the option of verifying the numbers with the issuing corporation. Once sold, the stock would lose its favored status.

ALEX MOOD

Irvine