Capital Gains Tax

Background
 
Many economists believe that reducing or eliminating the tax on gains from the sale of capital assets and on dividends paid from corporate earnings will stimulate economic growth by promoting capital formation and mobility.
 
The land mark Economic Growth and Tax Relief Act of 2001 (Public Law 107-16) – also known as the $1.35 trillion “Bush tax cut” package – included significant individual income tax rate reductions, lower tax rates for married couples, increased child tax credits, increased retirement plan limits and portability, phase-down and repeal of the estate tax, and reduction of the gift tax.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (Public Law 108-27) – the second Bush tax cut package – included acceleration of the income tax rate reductions, temporary expansion of the child credit, personal exemptions from the alternative minimum tax, section 179 small business asset expensing, and temporary reductions in taxes on dividends and capital gains.

The provisions enacted in 2001 and 2003 were scheduled to sunset at the end of 2010. However, in December 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312) was signed into law. This legislation:

  • Extends through 2012 of the individual income tax relief provided in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA);
  • Provides an estate tax for 2010 through 2012, with an exemption of $5 million per person and rates up to 35% with an election out of the tax for 2010; and
  • Extends 50% bonus depreciation and small business expensing through 2012 and provides a 100% expensing allowance for property placed in service after September 8, 2010, through 2011.

Chamber Position
 
A leading priority for the U.S. Chamber is to work to preserve current individual marginal tax rates and capital gains and dividends rates for all taxpayers. The Chamber believes that raising individual marginal tax rates and investment tax rates would undermine economic recovery, choke off job creation, and take money out of the hand of the individuals and businesses that create jobs, spur investment, boost consumption, and promote economic growth.