Post-Election, Congress and Administration Must Act Swiftly to Avoid "Fiscal Cliff"
Bipartisan action needed to avoid devastating tax increases
FOR IMMEDIATE RELEASE
Washington, D.C. – In the coming weeks, elected leaders in Washington will reconvene for the closing weeks of the 112th Congress. During this time, lawmakers must decide a course of action on a host of tax provisions that have expired or will expire on January 1, 2013 under the so-called "fiscal cliff" scenario. Among the current rates set to expire are the 15 percent maximum tax rate for long-term capital gains and dividend income.
Former U.S. Representative Jim McCrery (R-LA-Retired), Manager of the Alliance for Savings and Investment (ASI), issued the following statement on the need for immediate legislative action to avoid the fiscal cliff:
"Now that the election is over, Washington needs to come together to build a bridge over the fiscal cliff that threatens to throw our economy into recession.
"Uncertainty over future tax rates on investment income is already having an impact on our markets and investor behavior. If we go over the cliff, these rates will skyrocket, raising taxes on millions of individuals and families at every income level. These tax increases will threaten vital capital formation for companies looking to grow and create new jobs.
"Leaders in Washington need to emerge from the election ready to act swiftly to avoid the fiscal cliff and give taxpayers and businesses some certainty for the coming year."
Background on Investment Tax Rates:
Unless Congress and the Administration act, the current federal tax rates on capital gains and dividends will expire on December 31, 2012. While the maximum tax rate on capital gains will increase from 15 percent to 23.8 percent, the maximum tax rate on dividends will skyrocket from 15 percent to 43.4 percent (top income tax rate of 39.6% + new health care reform surtax of 3.8%)—a nearly 190-percent increase.
Millions of Americans-from all income levels and age groups-directly own stocks that pay dividends. Dividend-paying stocks are also held by the tens of millions of Americans who own stocks indirectly through mutual funds, and they support the value of stocks held in employer and union pension plans, life insurance policies, 401(k) plans, and individual retirement accounts.
Tax increases associated with the fiscal cliff are already impacting business decisions and raising alarm among world leaders. Here are recent news stories outlining the impact and concern over the fiscal cliff:
- U.S. fiscal cliff, Europe's debt woes worry G20 - Reuters, November 5, 2012
- Looming Tax Hike Motivates Owners to Sell - WSJ, November 1, 2012
ASI is a diverse coalition of dividend-paying companies, investor organizations 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.