The Honorable Wally Herger
United States House of Representatives
2268 Rayburn House Office Building
Washington, DC 20515
Dear Representative Herger:
On behalf of the 362,000 members of the National Taxpayers Union, I write in strong support of your "Double Taxation Elimination Act," H.R. 5908. This bill would permanently repeal capital gains and dividends taxes for both individuals and businesses. In doing so, it would reduce burdens on investors and help spur our economy in this difficult time.
In one sweeping action, this bill would solve the problems caused by the Tax Code's current treatment of capital gains and dividends. Even at the reduced rate of 15 percent, current capital gains and dividends tax policy punishes investments by imposing double-taxation. Because dollars that are invested had to first be earned, they have already been subject to taxation at the higher personal income tax rates. Taxing these dollars again if and when capital gains are realized only serves to deter productive, calculated risk-taking and reduce much-needed investment in our economy.
The "Double Taxation Elimination Act" would also have the effect of negating the less-publicized but equally damaging "inflation tax" built into capital gains treatment. Current policy taxes a capital gain from its basis without regard to the impact of inflation.
For example, an individual who purchased an asset in 1957 for $100 and sold it in 2007 for $700 would generally pay up to 15 percent in taxes on the $600 "gain." However, inflation actually rendered that investment a $55 loss. H.R. 5908 would prevent another $90 worth of salt being poured into that wound. Sound policy should not tax a "gain" which gives the taxpayer or the U.S. economy no additional economic benefit.
Capital gains and dividends taxation are not simply issues for the mega-rich. Over half of all Americans own stock, most of whom are solidly middle class. Roughly 80 percent of those claiming capital gains or dividends report earnings of less than $100,000 and 47 percent have incomes less than $50,000.
We applaud your efforts to eliminate harmful double-taxation and look forward to working with you to pass this important piece of legislation. Any roll call votes on H.R. 5908 will be heavily weighted in our annual Rating of Congress.
Sincerely,
Andrew Moylan
Government Affairs Manager