Hikes on dividends and capital gains would stifle the market, hurt shareholders at all levels
WASHINGTON, D.C. -Democratic Presidential candidate John Kerry\’s chief economic advisor, Jason Furman, told CNBC\’s Squawk Box this morning that the Democratic campaign will raise the onerous double tax on dividends and capital gains tax rate. Furman claimed that raising these taxes is necessary in large part to fund John Kerry\’s socialized health care program.
"John Kerry wants to impose crippling taxes on investors in order to pay for massive new government spending," said ATR President Grover Norquist. "Cutting taxes on investment helped fuel both the late \’90 boom and the current recovery. Without question, raising taxes on dividends and capital gains will send the market downward and reduce returns for shareholders."
Cutting the capital gains tax rate is more than just a lower tax bill for investors. By cutting the tax rate, the after tax return on equities increases. In fact, following the 1997 and 2003 capital gains tax reductions, shareholder wealth increased by more than $2 trillion both times. Following the 2003 tax reduction on dividends, companies immediately responded by initiating and increasing their dividend payments to shareholders. All told, individual dividend income generated by S&P 500 companies increased by 50 percent following the passage of the tax cut.
"The double tax made dividends a bad deal, discouraged investment, disenfranchised shareholders and hurt the economy," said Daniel Clifton, executive director of American Shareholders Association (ASA). "Now that the burden has been lifted by President Bush\’s dividend tax cut, companies are finally returning money to where it belongs: shareholders\’ pockets. In the past year dividend activity has exploded, which has worked to enhance economic growth and improve corporate governance."
Presently, 52 percent of American households, 60 percent of adults, and 67 percent of voters own stock directly or indirectly. With more individuals owing shares of stock, the stock market has become increasingly more important to family balance sheets. In 1989, 28 percent of a family\’s financial assets were stocks and mutual funds. Today, 56 percent of families\’ financial assets are stocks and mutual funds, which are used to pay for health care, college savings, and retirement assets.