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Letter to President Obama Seeks to Prevent Tax Hikes on Capital Gains and Dividends

Posted by Brian Garst on August 1, 2010

The Alliance for Savings and Investment (ASI) – “a diverse group of dividend-paying companies, investor organizations, and trade associations committed to strengthening the economy through policies that foster private savings and capital investment” – recently sent a letter to President Obama explaining why the current 15% capital gains and dividends rates need to be made permanent.

…In the interests of increasing investment that will lead to substantial job creation and a sustainable economic recovery, we believe that Congress should act this year to keep capital gains and dividend taxes low and linked. If Congress fails to act by December 31, 2010, the maximum capital gains tax rate would increase by as much as 33 percent. For dividends, the increase is even more dramatic, with tax rates for many individuals increasing by nearly 164 percent.

…These tax increases would have a stifling effect on our nation’s economic recovery. First, the increases would potentially cost thousands of American jobs at a time of stubbornly high unemployment by deterring investment and raising the cost of capital for businesses, thus stifling the recovery. Second, the increases would discourage many corporations from distributing dividends to their shareholders, hurting American investors at all income levels, especially seniors who rely on dividend income to supplement their fixed monthly income. Lastly, the increases would re-establish unequal tax rates for capital gains and dividends, further exacerbating the perverse economic incentives for corporations to utilize excessive debt financing, thus ignoring a key lesson learned from the financial crisis.

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