Lower Cap Gains Rate = Higher Economic Growth

WASHINGTON – In 2003 President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). The legislation reduced the capital gains tax rate by 25 percent and substantially reduced the double tax placed on dividends. The purpose of these two provisions was more than just a lower tax burden for investors, but also to increase equity values and boost dividend income. The 2003 tax cut has been an unmitigated success and should be extended.

History demonstrates that a lower tax rate on capital gains leads to greater economic growth. The capital gains tax rate has been changed four times since 1980, resulting in five different periods. Increases in capital gains tax rates were followed closely by a falloff in growth. Similarly, capital gains cuts were followed directly by often dramatic increases in economic growth. Notice the sharp rise in economic growth following the 2003 tax cut.

Congress needs to extend the lower tax rates on dividends and capital gains.

Lower Capital Gains = Higher Economic Growth