For Immediate Release – July 19, 2007        
Contact: Ed Frank or Annie Patnaude, (202) 349-5880

WASHINGTON – A coalition of 36 citizen groups representing millions of grassroots activists, investors, and retirees today sent an open letter to the U.S. Senate and House, urging lawmakers to reject a hike in the 15 percent tax rate on capital gains for individuals or for partnerships, which would ultimately take a tax bite out of Americans’ retirement savings. The letter, which was organized by the grassroots free-market group Americans for Prosperity, clearly demonstrates the importance of the issue to center-right groups and their solidarity on the subject. Click to view the coalition letter to the U.S. House and U.S. Senate.

“Raising the capital gains tax rate will dramatically reduce the after-tax return on stock investments, which would send markets reeling and adversely impact the 60 percent of American families who are now invested in individual stocks, mutual funds, 401(k) plans, Individual Retirement Accounts (IRAs), union pensions and other investment vehicles,” the letter noted.

Signatories were quick to point out that raising the cost of capital would dry up investment in innovative and entrepreneurial companies with the end result of jeopardizing job creation for millions of Americans. Every hike in the capital gains tax rate for the past 30 years has led to lower federal revenues, while capital gains tax cuts have paved the way for higher revenues.

The letter also argued vociferously against treating partnership carried interest as anything other than capital gains. “They represent a return on risk capital, in the form of the sweat equity of the general partners who put together these deals.  General partners who sell a portion of their profits to limited partners are no different from any entrepreneur with an idea to build a company who uses equity financing to build that company with other people’s money.  General partners in investment partnerships, like other entrepreneurs, typically retain an ownership stake based on the human capital they put into the deal, even if they put in little or no money of their own.”

The groups signing the letter include Americans for Tax Reform, Americans Conservative Union, Club for Growth, as well as prominent state taxpayer groups such as Iowans for Tax Relief, Tennessee Tax Revolt, and the Taxpayers League of Minnesota.

“Capital income should be taxed at the lowest possible rate without respect to who the taxpayer is,” the signatories concluded. “Characterizing the treatment of capital gains as a loophole for some taxpayers will lead to it being called a loophole for everyone.  Any concession to advocates of higher capital gains taxes is therefore more likely to embolden than to appease them.  We therefore urge you to strongly oppose any attempt to increase the capital gains tax rate for partnerships or individuals.”

In June AFP organized a coalition letter from twenty citizen groups representing millions of taxpayers, which called on U.S. Senators to reject the Baucus-Grassley proposal to hike taxes on private-equity firms that “go public.” The full letter is available online at www.AmericansforProsperity.org.

Americans for Prosperity (AFP) is the nation’s premier grassroots organization committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best safeguard to ensuring individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth, and returning government to its constitutional limits. For more information, visit www.americansforprosperity.org

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