ASI letter to U.S. House Leadership
The Honorable John Boehner
Speaker of the U.S. House of Representatives
Office of the Speaker
H-232 The Capitol
Washington, DC 20515
The Honorable Nancy Pelosi
Democratic Leader of the U.S. House of Representatives
Office of the Democratic Leader
H-204, US Capitol
Washington, DC 20515
Dear Speaker Boehner and Leader Pelosi,
The Alliance for Savings and Investment (ASI) represents a diverse group of companies and industry trade associations committed to driving economic growth and job creation through policies that foster private savings and capital investment.
ASI and its members strongly urge Congress to take swift action to avert the impending cliff that will occur at the end of this year. Keeping dividends and capital gains taxes at current rates – for all income levels – is critical to encouraging long‐term economic growth and job creation, and protecting millions of small businesses and American families who are struggling to save. Allowing rates to expire will have immediate negative consequences on investors at all income levels. In addition, it should not be assumed that market values will not be affected until very near the date of expiration of the current rates. It is likely the market will begin to price in the expiration months in advance, thus the need to act soon to avert the tax increases on investment income.
Maintaining the existing tax rates on investment for taxpayers preserves the incentive for everyone to invest for their future. If Congress doesn’t take action soon, the capital gains tax rate will increase to 20 percent from 15 percent and the dividend rate will more than double from 15 percent to 39.6 percent, and, with the new 3.8% Medicare tax and the loss of personal deductions and exemptions, the top rate on dividends would triple.
Allowing such massive rate hikes will 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. 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 dividends to supplement their fixed monthly income. In addition, taxing dividends at a rate higher than that for capital gains leads investors to favor growth stocks over dividend-paying stocks. Lastly, higher tax rates for investment income lead to less demand for companies’ stock, which, when combined with the corporate tax deduction for interest, incentivizes corporations to utilize debt financing over equity financing.
Our members are dedicated to making current investment tax rates permanent for all income levels. However, we also recognize that such a move will most likely occur in the context of overall tax reform, which could take time. In the interim, we encourage Congress, at the very least, to provide a bridge to reform through additional temporary measures.
The Alliance for Savings and Investment1
The Alliance for Savings and Investment (ASI) is a diverse coalition of dividend-paying companies, investor organization and trade associations, formed in support of a common goal: to promote economic recovery, growth and job creation through policies that foster private savings and capital investment. ASI members include: AGL Resources, Altria, American Forest & Paper Association, American Gas Association (AGA), AT&T, Capital Research and Management Company, CenturyLink, Charles Schwab, Edison Electric Institute (EEI), Frontier Communication, Investment Company Institute (ICI), Laclede Gas Company, MassMutual Life Insurance, National Association of Manufacturers, National Association of Water Companies, New York Life, NYSE, Securities Industry and Financial Markets Association (SIFMA), Southern Company, Spectra Energy, The Coca-Cola Company, RAI Service, UPS, United States Telecom, Vanguard, Verizon, Windstream Corp, and Xcel Energy.