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.
Sincerely,
Fred Smith
President
Competitive Enterprise Institute
Tim Phillips
President
Americans for Prosperity
David M. Stanley
Chairman
Iowans for Tax Relief
Jim Martin
President
60 Plus Association
Alex-St. James
Chairman
African American Republican Leadership Council
David Keene
Chairman
American Conservative Union
Dick Patten
President
American Family Business Institute
Mark Chmura
Executive Director
Americans for the Preservation of Liberty
Ryan Ellis
Executive Director
American Shareholders Association
Grover Norquist
President
Americans for Tax Reform
Alvin Williams
President & CEO
Black America's PAC
Andrew Quinlan
President
Center for Freedom and Prosperity
Jeffrey Mazzella
President
Center for Individual Freedom
Doug Bandow
Vice President for Policy
Citizen Outreach Project
Pat Toomey
President
Club for Growth
Paul M. Weyrich
National Chairman
Coalitions for America
Morton C. Blackwell
Chairman
Conservative Leadership PAC
Tom Schatz
President
Council for Citizens Against Government Waste
Richard O. Rowland
President
Grassroot Institute of Hawaii
Tom Hoefling
Chairman
Idahoans for Tax Reform
Greg Blankenship
President
Illinois Policy Institute
Michelle Bernard
President and CEO
The Independent Women's Forum
Dr. Don Racheter
Moderator
Iowa Wednesday Group
Richard Falknor
Executive Vice-President
Maryland Taxpayers Association, Inc.
David Strom
President
Minnesota Free Market Institute
Forest Thigpen
President
Mississippi Center for Public Policy
Amy Ridenour
President
National Center for Public Policy Research
Lew Uhler
President
The National Tax Limitation Committee
John Berthoud
President
National Taxpayers Union
Sharon J. Rossie
President
The Nevada Policy Research Institute
Geoffrey Segal
Director of Government Reform
Reason Foundation
Paul Gessing
President
Rio Grande Foundation
Karen Kerrigan
President & CEO
SBE Council
Phil Krinkie
President
Taxpayers League of Minnesota
Rick Durham
President
Tennessee Tax Revolt
Michael Quinn Sullivan
President
Texans for Fiscal Responsibility