Capital Gains and Dividend Tax Cut Fact of the Day #16

Dividend Tax Cut “Cost” Way Overestimated

WASHINGTON – In 2003 President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). The legislation cut income tax rates, reduced the capital gains tax rate by 25 percent and substantially reduced the double tax placed on dividends. Immediately following the tax cut, economic growth, job creation, stock prices, dividends, and personal income skyrocketed. The 2003 tax cut has been an unmitigated success and should be extended.

The capital gains tax cut more than paid for itself as higher levels of economic growth and $5.1 trillion of shareholder wealth generated 16 times more revenue to the federal government than projected after the tax cut. Similarly, the Congressional Budget Office (CBO) has already acknowledged that its initial predictions overestimated the loss in revenue following the tax cut.

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

According to CBO’s own report from 2005:

“Total revenue reductions from the new tax return data and new estimates of the effects of asset accumulation are partially offset through 2009 by reductions in the estimated loss in revenues from the reduced rates of taxation on dividends.”