Tax Debate Also Involves Dividends, Capital Gains
By JOHN CUSHMAN
The debate over what to do about the expiring Bush-era tax cuts has focused mainly on income tax rates and the fight between Democrats and Republicans over maintaining the tax breaks for the wealthiest Americans.

But in a letter to the House speaker, Nancy Pelosi, 47 rank-and-file Democrats urged Congressional leaders to maintain lower tax rates on dividends and capital gains that are also due to expire on Dec. 31.

“Our fiscal policy should be one that maximizes economic growth and private sector job creation,” the lawmakers, led by Representative John Adler, Democrat of New Jersey, wrote.

“By keeping dividends and capital gains tax rates linked and low for everyone, we can help the private sector create jobs and allow seniors and middle class households to save and invest more,” the Democrats added in the letter.

President Obama and Democratic Congressional leaders want to let the lower tax rates – including the rates on most dividends and long-term capital gains – expire for couples earning more than $250,000 a year, and individuals earning more than $200,000.

For Americans earning less than those amounts, the president’s plan would make permanent both the lower marginal income tax rates, and the current 15 percent rate on long-term capital gains and most dividends.

In the letter to Ms. Pelosi, the 47 Democrats, warned that an increase in the tax rate on dividends would be felt most acutely by retirees living on fixed incomes.

“Raising taxes on capital gains and dividends could discourage individuals and businesses from saving and investing,” they wrote. “We urge you to maintain the current tax rate for both dividend and long-term capital gains taxes.”

While Republicans are generally in agreement about continuing the tax breaks for everyone, Democrats have been divided. Some lawmakers, particularly those facing tough re-election fights, have urged maintaining the tax breaks for the rich, at least temporarily, because of the weak economy.

At a briefing for reporters on Tuesday, the House majority leader, Representative Steny H. Hoyer, Democrat of Maryland, said there was still a possibility that Democrats would force a vote on the tax cuts before they adjourn this week for the fall campaign.

Such a vote remains unlikely, but Mr. Hoyer’s unwillingness to flatly rule it out suggests that there is an ongoing tug-of-war within the Democratic ranks. Some Democrats say a vote would show Republicans blocking tax relief for the middle class in order to fight for tax breaks for the wealthy.

http://thecaucus.blogs.nytimes.com/2...capital-gains/