AUSTIN - Daniel F.C. Crowley, chief government affairs officer for the Investment Company Institute in Washington, reported on Monday that the investor-friendly GROWTH Act is gaining momentum in Congress, but factors outside the mutual fund industry's control could postpone action on the capital gains tax relief bill.
"Pressures on the federal budget caused by the deficit, the continuing war in Iraq, and most recently the colossal damage caused by Hurricanes Katrina and Rita mean that it will be quite difficult politically to enact new tax incentives," Crowley said during a keynote address at the ICI 2005 Operations Technology Conference, held here through today.
Introduced earlier this year, the GROWTH Act would eliminate the long-term capital gains tax that mutual fund investors incur annually if the investor were to reinvest those earnings back in to the fund. In short, the legislation would put mutual funds on even ground with direct stock investments, where investors are taxed only when they redeem their shares.
"Mutual fund investors who automatically reinvest are doing the right thing," said Crowley, whose division at the ICI represents mutual funds, their advisors and investors before Congress and the executive branch of the federal government. "They are saving for the long-term, contributing to our national economy and building up their own retirement nest egg. These Americans should be encouraged to save - not punished for doing so through a tax on automatic reinvestments."
The bill now has 40 bipartisan co-sponsors in the House and five bipartisan co-sponsors in the Senate, said Crowely, adding that such support in such a short time frame "tells me that we're onto something significant that could benefit millions of mutual fund investors."
But, Crowely added, a strong showing of grassroots support is needed to carry the bill's momentum forward in Washington's current political environment.
"Which [tax] reforms prevail will depend on how the broad the support for each proposal. Politics is about who gets what, when and how," Crowley said.
One way to further the grassroots effort, he offered, would be for fund companies to provide a link to the ICI's GROWTH Act website, www.fundingyourfuture.org, where investors can e-mail a letter of support to their congressman.
Looking further ahead, Crowley said the popularity of the Bush administration is severely waning and that could portend change in 2008. If that sentiment swings the majority in Congress away from the fund industry-friendly G.O.P, it won't impact the ICI's work, Crowley said.
"The ICI performs its work in Washington in a bi-partisan way," he said. "We shoot right for the middle."