The Investment Company Institute (ICI) is calling on Congressional leadership to pass legislation that would reform taxation on capital gains.
The legislation in question is the Generating Retirement Ownership Through Long-Term Holding (GROWTH) Act (S. 1839), introduced by U.S. Sen. John Cornyn (R-TX). The GROWTH Act would allow investors to defer taxation of automatically reinvested capital gains distributions until they sell their fund shares.
According to ICI, investors could see up to $1,340 more in returns over a 10-year period on a $10,000 equity mutual fund investment under this framework.
“Tax fairness for 40 million Americans depends on Congress passing the GROWTH Act. This is a common sense fix to the tax code that will help the middle class at a time when Americans are still facing high costs. Congress should encourage these families to keep saving and investing towards their goals. Passage of the GROWTH Act is an integral piece of their secure financial future,” Tom Quaadman, ICI chief government affairs and public policy officer, said.
The GROWTH Act does not exempt capital gains from taxation, it simply delays the taxation until the investor sells the shares. This bill would make the taxation of mutual funds consistent with the taxation of other assets, where most capital gains taxes are not levied until an investor sells and actually realizes the gains.
ICI sent a letter to Congressional leaders urging passage of the bill. The letter was also signed by the U.S. Chamber of Commerce, American Council for Capital Formation, American Securities Association, Americans for Tax Reform, Financial Services Institute, Investment Advisor Association, and SIFMA & SIFMA-AMG.
“At a time when middle-class Americans are facing higher costs and working harder than ever, the GROWTH Act is a common-sense change that helps people saving for their goals. We strongly urge both chambers of Congress to help pass the GROWTH Act and improve long-term financial security for millions of Americans,” the letter states.
The House version of the bill, H.R. 2089, is sponsored by Reps. Beth Van Duyne (R-TX) and Terri Sewell (D-AL).