The U.S. House of Representatives has gone on federal public record as warning the industry and government legislators that raising long-term capital gains on mutual fund investors any higher than it already is will seriously impair the markets, shareholders, and, eventually, retirees.


Citing a recent Lipper report, the U.S. Joint Economic Committee underscored the $16.7 billion in additional capital gains tax that shareholders paid in tax year 2007, for a total bill of $334.0 billion, up from $233.8 billion in 2006.


“The tax law should be changed to permit mutual fund shareholders to defer most or all taxes on reinvested long-term capital-gain distributions until the mutual fund shares are sold,” said Congressman Jim Saxton (R-N.J.), a ranking member of the Committee and author of H.R. 397, in a statement.


The Lipper report warns, in strident language: “Considering most mutual fund investors reinvest their distributions back into the funds, that is a large price to pay for a buy-and-hold strategy!!!”


Saxton added: “As the new study shows, the tax burden on mutual fund shareholders is rising as mutual funds continue to realize net capital gains. This tax burden is a drag on saving and reinvestment and will get much worse if tax rates on capital gains are allowed to increase in coming years.”

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