In a letter sent via the industry’s chief lobby group, the leadership of more than 60 mutual fund companies today asked the House Ways and Means committee to consider allowing mutual fund investors to defer taxes on their capital gains provided those investors reinvest the appreciated assets.

The companies hope the House will include the tax-deferment provision in an economic stimulus package that Washington has been mulling in an effort to counter the effects of a recession and the economic fallout following the terrorist attacks of Sept. 11. Executives propose that the taxes would be due only when an investor sells a fund.

The letter was sent by way of the Investment Company Institute to Ways and Means committee chairman William Thomas (R-Calif.). In it, executives argue that allowing investors to defer taxes on their capital gains from mutual funds would "encourage long-term investment in our economy," and place more capital in the hands of middle-class investors to reinvest. In addition, ICI spokesman John Collins said deferring the tax would make mutual funds more alluring to investors.

But it is unclear whether officials in Washington will even consider the idea of including the provision in a stimulus package. "The Hill has many things on its mind right now," Collins said.

And this isn’t the first time the industry has lobbied Washington on the matter. Rep. Jim Saxton (R-N.J.) introduced two bills last year that would defer capital gains taxes on mutual funds provided the gains were reinvested. Neither of the bills have yet been considered on the House floor, Collins said.

Today’s letter was signed by executives from firms of all sizes, including Fred Alger of Alger Funds, Stephen Canter of Dreyfus Funds, and William Lyons of American Century Family of Funds.

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