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Letter from ASI to Tax Negotiators

December 2, 2010   Bookmark and Share

The Honorable Timothy Geithner
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

The Honorable Jack Lew
The Office of Management and Budget
725 17th Street, NW
Washington, DC 20503

The Honorable Max Baucus
United States Senate
511 Hart Senate Building
Washington, D.C. 20510

The Honorable Jon Kyl
United States Senate
730 Hart Senate Building
Washington, D.C. 2051

The Honorable Chris Van Hollen
United States House of Representatives
1707 Longworth House Office Building
Washington, D.C. 20515

The Honorable Dave Camp
United States House of Representatives
341 Cannon House Office Building
Washington, DC 20515

Dear Secretary Geithner, Director Lew, Chairman Baucus, Senator Kyl, Representative Van Hollen and Representative Camp:

The Alliance for Savings and Investment (ASI), comprised of the undersigned companies, organizations and industry trade groups and representing millions of employees, strongly urges you to include an extension of the current 15 percent maximum tax rates on dividends and capital gains in any 2010 tax package.

Absent an extension, the maximum tax rate on dividends will rise from 15 percent to nearly 40 percent – a 164 percent increase – and capital gains tax rates will increase to 20 percent. Such dramatic and sudden increases could destabilize the capital markets in the short-term and raise the cost of capital for businesses over the long-term, hindering our nation’s fragile economic recovery.

Given the current economic environment, we believe strongly that there should be bipartisan support for tax policies that incentivize businesses to invest and create jobs. Extending the capital gains and dividends tax rates would be an immediate and important contribution to that effort. Allowing them to expire – even in the hopes of revisiting the rates immediately in the next Congress – would have adverse economic affects that may prove to be irreparable.

Recent economic research underscores the critical nature of extending these rates in order to keep the economy moving in the right direction. In a Tax Foundation study released earlier this year, former Deputy Assistant Secretary of the Department of Treasury Bob Carroll found that returning the dividends and capital gains rates to the previous levels would lead “to reduced aggregate invest¬ment and capital formation” – even if the increase is only for those in the top income bracket.

This view is shared by a former chief economic advisor to President Obama, Dr. Christina Romer. Her study concluded that such tax increases would have a “contractionary effect” on our economy, stemming largely from the powerful negative effect they would have on investment. The Progressive Policy Institute released a study echoing that view. It concluded that in the middle of an investment drought “allowing the tax rate on dividends and capital gains to rise would be a step in the wrong direction… That’s true whether you believe in Keynesian economics, supply-side economics or anything in between. ”

Thank you in advance for considering our request to include an extension of current dividend and capital gains tax rates for all taxpayers in your final tax package.

Sincerely,

The Alliance for Savings & Investment

ASI Members:

  • AGL Resources
  • Altria Client Services Inc.
  • American Forest & Paper Association
  • American Gas Association
  • AT&T
  • Business Roundtable
  • Capital Research and Management Company
  • CenturyLink
  • Edison Electric Institute
  • Financial Services Forum
  • Frontier Communications
  • Investment Company Institute
  • The Laclede Group Inc.
  • MassMutual Financial Group
  • National Association of Manufacturers
  • National Association of Water Companies
  • Qwest
  • Reynolds American Inc.
  • SIFMA
  • Spectra Energy
  • UPS
  • U.S. Chamber of Commerce
  • US Telecom Association
  • Verizon
  • Windstream
  • Xcel Energy