On behalf of the millions of grassroots investors who are members of our organizations, we strongly urge you to reject any increase in the 15 percent tax rate on capital gains for individuals or for partnerships.
Raising the capital gains tax rate will dramatically reduce the after-tax return on stock investments, which would send markets reeling and adversely impact the 60 percent of American families who are now invested in individual stocks, mutual funds, 401(k) plans, Individual Retirement Accounts (IRAs), union pensions and other investment vehicles.
It would significantly raise the cost of capital, drying up investment in many innovative, entrepreneurial companies, jeopardizing future job creation for millions of American workers. It also would hit the U.S. Treasury hard, contrary to the conclusions of the static-revenue scorekeepers. Every capital gains rate hike in the past 30 years has led to lower federal revenues, while every capital gains rate cut has led to higher revenues.
Partnership carried interests are capital gains. They represent a return on risk capital, in the form of the sweat equity of the general partners who put together these deals. General partners who sell a portion of their profits to limited partners are no different from any entrepreneur with an idea to build a company who uses equity financing to build that company with other people’s money. General partners in investment partnerships, like other entrepreneurs, typically retain an ownership stake based on the human capital they put into the deal, even if they put in little or no money of their own. Congress Members calling this capital income wages doesn’t make it so.
The primary rationales for taxing capital income at a 15 percent rate are that it alleviates double-taxation of corporate profits and that it encourages risk-taking by rewarding it, when it is successful, with higher after-tax returns. Both of these rationales weigh in favor of a capital gains tax rate of zero, as former Federal Reserve Chairman Alan Greenspan repeatedly advised Congress.
Capital income should be taxed at the lowest possible rate without respect to who the taxpayer is.
Characterizing the treatment of capital gains as a loophole for some taxpayers will lead to it being called a loophole for everyone. Any concession to advocates of higher capital gains taxes is therefore more likely to embolden than to appease them. We therefore urge you to strongly oppose any attempt to increase the capital gains tax rate for partnerships or individuals.
Competitive Enterprise Institute
Americans for Prosperity
David M. Stanley
Iowans for Tax Relief
60 Plus Association
African American Republican Leadership Council
American Conservative Union
American Family Business Institute
Americans for the Preservation of Liberty
American Shareholders Association
Americans for Tax Reform
President & CEO
Black America's PAC
Center for Freedom and Prosperity
Center for Individual Freedom
Vice President for Policy
Citizen Outreach Project
Club for Growth
Paul M. Weyrich
Coalitions for America
Morton C. Blackwell
Conservative Leadership PAC
Council for Citizens Against Government Waste
Richard O. Rowland
Grassroot Institute of Hawaii
Idahoans for Tax Reform
Illinois Policy Institute
President and CEO
The Independent Women's Forum
Dr. Don Racheter
Iowa Wednesday Group
Maryland Taxpayers Association, Inc.
Minnesota Free Market Institute
Mississippi Center for Public Policy
National Center for Public Policy Research
The National Tax Limitation Committee
National Taxpayers Union
Sharon J. Rossie
The Nevada Policy Research Institute
Director of Government Reform
Rio Grande Foundation
President & CEO
Taxpayers League of Minnesota
Tennessee Tax Revolt
Michael Quinn Sullivan
Texans for Fiscal Responsibility