Capital Gains Tax Reduction bill

Amends the Internal Revenue Code to permit an income tax deduction in the amount of dividends paid by domestic corporations, except S corporations, regulated investment companies, real estate investment trusts, and personal holding companies.

Repeals the income tax deductions currently permitted in connection with: (1) dividends received by a corporation; (2) dividends received by a corporation on the preferred stock of a public utility; and (3) dividends paid by a public utility on its preferred stock.

Revises the deductible percentage of amounts received by a corporation from a qualified ten-percent owned foreign corporation.

Revises the maximum capital gains rate to limit such tax to the sum of: (1) a tax computed at the rates and in the same manner as if capital gains provisions had not been enacted on taxable income reduced by the qualified net capital gain; and (2) a tax equal to the sum of specified percentages of net gains based on number of years (with a maximum percentage of 23 percent of three-to-six year net gains and lower percentages of gains of more than six years).

Restores the investment tax credit for manufacturing equipment.