Letter from ASI to President Obama
The Honorable Barack H. Obama
President of the United States
The White House
1600 Pennsylvania Ave., NW
Washington, DC 20500
Dear President Obama,
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. In particular, ASI supports maintaining the current 15 percent maximum tax rates on dividends and capital gains. An extension of these rates would provide much needed certainty to businesses, families and retirees who now face the threat of a looming tax increase during this time of continued economic and market uncertainty.
ASI and its members are heartened by your Administration’s budget proposal and the recent statements by Treasury Secretary Tim Geithner indicating that keeping dividends and capital gains taxes low – 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 invest and save.
The comprehensive tax plan you’ve proposed maintains the existing tax rates on investment for lower- and middle-income taxpayers, preserving the incentive for these families to save and invest for their future. In doing so, your plan embraces two equally important principles: maintaining equal tax rates on dividends and capital gains, thereby eliminating the bias against paying dividends; and, preserving differential tax rates for savings and investment that are lower than ordinary income tax rates to reduce the burden of double taxation, which can depress investment and kill jobs.
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 increases do not reflect the recently passed 3.8 percent Medicare health insurance tax that will apply to certain investors in 2013, raising their tax rate on dividend income to 43.4 percent, the highest level in decades.
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.
Congress and your administration must provide certainty to investors during a period of economic crisis and financial instability. We appreciate Secretary Geithner’s recent commitment on Meet the Press to keep these rates from expiring and are hopeful that you will advocate for Congress to act swiftly to preserve the low and equal tax rates on capital gains and dividends. We look forward to working with you to achieve this objective.
The Alliance for Saving and Investment:
- AGL Resources
- American Forest & Paper Association
- American Gas Association
- Business Roundtable
- Capital Research and Management Company
- Edison Electric Institute
- Financial Services Forum
- Frontier Communications
- Investment Company Institute
- Mass Mutual
- National Association of Manufacturers
- National Association of Water Companies
- Securities Industry and Financial Markets Association
- Spectra Energy
- U.S. Chamber of Commerce
- US Telecom Association
- Xcel Energy
The Honorable Joseph Biden, Vice President of the United States of America
The Honorable Timothy Geithner, Secretary of the Treasury
The Honorable Lawrence Summers, Director, National Economic Council
The Honorable Christina Romer, Chair, White House Council of Economic Advisors