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Identical Letter Sent to Members of the U.S. House and Senate
On behalf of the undersigned organizations and the millions of businesses and individuals that we represent, we strongly urge you to support a two-year extension of the reduced tax rates on dividends and capital gains that were enacted as part of the 2003 Jobs and Growth Act.
Today, our economy is exhibiting solid growth, low unemployment, and low inflation. In the past year, two million net new jobs have been created, the unemployment rate has been drawn down to 4.7 percent, and household wealth has increased to a record $51 trillion. Just a few years ago the economy was mired in a jobless recovery and beset with a crisis in investor and consumer confidence that threatened economic stagnation.
At the Administration’s urging, Congress boldly passed a series of tax cuts in May of 2003 designed to increase investment returns, stimulate capital formation and encourage job growth. A major component of the Jobs and Growth Tax Relief Reconciliation Act of 2003 was the reduction of the maximum tax rate on dividends and capital gains to 15 percent.
The impact of that action was dramatic. In the two years prior to the passage of the Act, real economic growth averaged only 1.3 percent, growth in business fixed investment averaged a negative 7.6 percent, and the economy lost 2.2 million jobs. In the period since the Act’s passage, the economy has average 3.9 percent real growth, investment growth has averaged a positive 8.7 percent and the economy has created 4.7 million net new jobs.
Despite dire predictions from opponents of the Act and some tax revenue estimators, the Act was also a clear winner for the federal treasury. Prior to its passage, federal revenue was falling. However, post-passage government revenue has risen dramatically. This improvement is due not only to the “unlocking” effect on capital gains in individuals’ asset holdings, but also to the “dynamic” effects of stronger economic growth on overall tax receipts.
For example, total tax revenue in 2004 was $1.88 trillion, up $98 billion from the previous year. In 2005, the jump was even larger, to $2.15 trillion. Much of this improvement is directly attributable to increases in capital gains taxes which, despite a lower rate, rose from $50 billion in 2003 to $60 billion in 2004, with $75 billion expected from 2005.
March 10, 2006
Unfortunately, these successful pro-growth tax cuts on capital gains and dividends are scheduled to expire in 2008, resulting in a devastating tax increase on the economy. As Members of the House and Senate meet to negotiate the details of the tax reconciliation package, we strongly urge the conferees to include a two-year extension of the current dividend and capital gains tax rates in their conference report.
It is critical that members of Congress continue the policies that have pulled our economy out of the doldrums, stimulated capital investment and created an engine of job growth. As you debate these issues of vital importance to the U.S. economy, we urge you to reject the misleading and erroneous arguments of anti-growth advocates who rely on flawed projections of lost revenues to justify their position. Ensure the continued success of the U.S. economy by extending proven pro-growth policies – pass a two-year extension of the lower rates on dividends and capital gains.
TRC MANAGEMENT COMMITTEE
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