Uncertainty. It's the reoccurring theme reverberating throughout our economy at the moment. It's on the minds of politicians, business owners, and American families. Recent economic data also suggests that uncertainty is having a material impact on growth.
Some certainty was provided to financial markets and the broader economy after the enactment of the Dodd-Frank financial reform law. More work still needs to be done by regulators in crafting the new rules the law requires, but nevertheless, the path forward is clearer than it was before Dodd-Frank became law.
But key contributors to our economy: financial markets, investors, businesses and families are still unclear over what their tax burden will be next year. Congress has an opportunity and responsibility to address this important issue before the end of the year.
Our member firms employ hundreds of thousands financial advisers that work with millions of Americans everyday to help them plan their financial future. One of the most frequent questions these advisers here from their clients is what will happen to capital gains and dividend tax rates, and how that will affect their investments.
Unless Congress acts, the taxes on capital gains and dividends will increase substantially in 2011. The capital gains tax rates would increase by as much as 33 percent, from a current maximum rate of 15 percent to 20 percent. The tax hike for dividends is even more drastic, with tax rates for many investors increasing by nearly 164 percent. These increases do not include the additional 3.8 percent tax on investment income that was already passed this year as part of the health care reform bill.
While all investors will be affected by this increase, senior citizens will be hit the hardest. According to the Tax Foundation, 42 percent of taxpayers over 65 reported dividend income on their tax returns. The vast majority of dividend income, 48 percent, is earned by those over 65, and dividend income accounts for 6 percent of all the income earned by seniors. Additionally, one-third of all taxpayers reporting capital gains income are over 65 and they earn 30 percent of all capital gains income.
Taxing investment not only hurts America's savers and investors, it undermines potential economic growth and job creation. According to the Heritage Foundation, high tax rates on capital gains and dividends would lead to 270,000 fewer jobs in 2011 and 413,000 fewer jobs in 2018. The economic effects would be felt in take-home pay as well. Personal income after taxes would decrease by $113 billion after inflation in 2011 and $133 billion after inflation in 2012 when compared to tax rates that would have existed under the current policy. Indeed, gross domestic product (GDP) would fall by $44 billion in 2011 and $50 billion in 2012 if taxes on capital gains and dividends were left to rise to pre-2001 levels.
The numbers speak for themselves. American investors -- especially seniors -- are faced with potentially massive tax hikes, and time is running out. Given the still fragile state of our economy, Congress absolutely must continue the current rates on capital gains and dividends regardless of income level to provide increased certainty for American businesses and families, but for our future economic growth and job creation.
Tim Ryan is President and CEO of SIFMA the leading financial services trade group which represents hundreds of securities firms, banks and asset managers throughout the country.
I strongly suggest to you is that what your "members" are waiting for is not for tax certainty, but for more buying power in the MIDDLE CLASS, i.e. some sign that there is some demand out there for your members goods and services. I perceive that you members are not dim witted. When they let their hair down, they would tell you that the CERTAINTY they want in respect to taxes is that enought taxes will be collected to prevent our drowning in national debt. In other words, the CLINTON tax program created a lot of certainty.
At the present, the 15% capital gains rate is lower than the self-employment tax of 15.3%.
Those who work for a living, are self-employed, and earn amounts below the threshold amount, pay taxes at a higher rate than those receiving capital gains.
You completely ignore that there is plenty of investment cash out there, just no Demand, thanks to ~20% real unemployment/underemployment, caused in large part, I might add, by your industry.
The fact of the matter is that investors invest, regardless of taxation, as long as they get a better return on their investment than the alternatives. Your entire argument is a self-serving, disingenuous diatribe that completely avoids the truth of the matter.
You want certainty? No problem, how about we revert to the tax structure under the Clinton Administration, plus a millionaire's tax of ~50% for income over $1 million. Tax capital gains as income, reinstate the estate tax for large (>$5 million) estates, and get rid of the perverse incentives in our tax code that encourage offshoring of jobs. That'll provide complete certainty and has the additional benefit of helping to put America back on a sound financial footing. This would help create middle-class jobs, build the economy up, and give your investors something to invest _in_.
Don't you remember it was Warren Buffet who asked why he should pay a lower tax rate than his secretary? Think about it: the Rich live mainly off investment income. They should be paying more. Keeping their rates low isn't going to achieve that.
Go peddle your BS elsewhere, you self-serving parasite.
The "reoccuring (sic) theme" that is reverberating throughout the economy is unemployment, not uncertainty.
Characterizing our financial markets, and, by implication the criminal enterprises known as "Wall Street Banks" as "key contributors to our economy" would be laughable were it not so painfully obscene.
Weren't you paying attention? They cratered the WHOLE DAMN ECONOMY with their reckless gambling with other peoples' money, looted the US Treasury in order to remain solvent (with the help of their lapdogs Paulson, Bernanke, Geithner, and Summers) and then paid themselves record bonuses for their trouble and smugly claimed they were doing "God's Work".
You want certainty? I think we should slap every one of them that received TARP bailouts should have punitive windfall profits taxes imposed on them indefinitely until unemployment falls below 5% and all their C-Level execs should be thrown in jail for criminal fraud and racketeering.
JM