A Letter Urging Congress to Reject Capital Gains Tax Hikes

Dear Representative,

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.


Fred Smith


Competitive Enterprise Institute


Tim Phillips


Americans for Prosperity


David M. Stanley


Iowans for Tax Relief


Jim Martin


60 Plus Association


Alex-St. James


African American Republican Leadership Council


David Keene


American Conservative Union


Dick Patten


American Family Business Institute


Mark Chmura

Executive Director

Americans for the Preservation of Liberty


Ryan Ellis

Executive Director

American Shareholders Association


Grover Norquist


Americans for Tax Reform


Alvin Williams

President & CEO

Black America's PAC


Andrew Quinlan


Center for Freedom and Prosperity


Jeffrey Mazzella


Center for Individual Freedom


Doug Bandow

Vice President for Policy

Citizen Outreach Project


Pat Toomey


Club for Growth


Paul M. Weyrich

National Chairman

Coalitions for America


Morton C. Blackwell


Conservative Leadership PAC


Tom Schatz


Council for Citizens Against Government Waste


Richard O. Rowland


Grassroot Institute of Hawaii


Tom Hoefling


Idahoans for Tax Reform


Greg Blankenship


Illinois Policy Institute


Michelle Bernard

President and CEO

The Independent Women's Forum


Dr. Don Racheter


Iowa Wednesday Group


Richard Falknor

Executive Vice-President

Maryland Taxpayers Association, Inc.


David Strom


Minnesota Free Market Institute


Forest Thigpen


Mississippi Center for Public Policy


Amy Ridenour


National Center for Public Policy Research


Lew Uhler


The National Tax Limitation Committee


John Berthoud


National Taxpayers Union


Sharon J. Rossie


The Nevada Policy Research Institute


Geoffrey Segal

Director of Government Reform

Reason Foundation


Paul Gessing


Rio Grande Foundation


Karen Kerrigan

President & CEO

SBE Council


Phil Krinkie


Taxpayers League of Minnesota


Rick Durham


Tennessee Tax Revolt


Michael Quinn Sullivan


Texans for Fiscal Responsibility