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NTU to Congress: Don't Raise Taxes on Investment Income

December 12, 2012

Dear Representative:  

On behalf of the more than 52,000 members of the National Taxpayers Union in California, I am writing to urge you to prevent the tax increases on investment income that are scheduled to take place in January. 

As Congress looks at competing plans to avert the “fiscal cliff” and reduce the budget deficit, it must avoid policy changes that exacerbate the nation’s economic woes.  One of the most economically destructive proposals being considered in Washington is allowing current tax rates to expire and thus, dramatically raising taxes on dividends and capital gains.  According to economists at the Tax Foundation, boosting the top tax rates on dividends to 39.6 percent and capital gains to 20 percent would reduce GDP by 2.15 percent.  The model shows that the associated economic contraction caused by these tax hikes would actually result in no new tax revenues for the federal government.

And it gets worse. The Tax Foundation’s analysis did not include the 3.8 percentage-point surtax on investment income that will take effect in January as a result of the federal health reform law.  Nor could it have accounted for the passage of Proposition 30, which is subjecting many Californians to a tax increase on investment income.  As you know, the State of California taxes investment income as regular income and the new rates on higher earners -- which can reach up to 13.3 percent -- have already taken effect.  These new, harsher investment taxes will only serve to further depress economic output. 

As Congress considers “fiscal cliff” proposals, it should steer clear of harmful policies that would endanger the slow economic recovery taking place in California and across the nation.  For this reason our members encourage you in the strongest possible terms to maintain the current federal tax rates on capital gains and dividends.


Brandon Arnold
Vice President of Government Affairs