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March 15, 2006
JS-4126
Remarks by Robert Carroll,
Deputy Assistant Secretary for Tax Analysis
U.S. Department of the Treasury
Before the 17th Annual Tax, Budget and Legislative Policy Seminar
(Co-sponsored by Baker & Hostetler LLP, Clark Consulting,
and the Yale Club of Washington, DC)
March 15, 2006
Thank you very much for the opportunity to talk with you today. There are several tax issues before the Congress that I would like to address.
Preserving the lower tax rates on dividends and capital gains is an issue that is at the center of the current discussions on tax reconciliation. Preserving these lower tax rates is a top priority of the Administration. As you know, conferees were named several weeks ago and deliberations are underway.
It is important to consider the lower tax rates on dividends and capital gains against the backdrop of the current strength of the economy. When this tax relief was enacted in May 2003, there were some who suggested that this policy would not contribute to economic growth, would not boost investment, and would not support government revenues. Over the past few years we have seen a very different story emerge.
This is a policy that has met expectation. In a phrase, the economy is doing remarkably well. By virtually every indicator, the economy shows robust and continuing growth. We are now in a period where the economy has grown at an average rate of more than 3.9 percent for 10 consecutive quarters. Americans net worth is the highest ever. Homeownership rates are the highest ever. Inflation is not a concern and long-term interest rates remain at historic lows.
We have come a long way in the past several years. We have gone from a period of several substantial shocks to the economy – the bursting of the high-tech bubble and a loss of $7 trillion dollars in the equity markets, the 9/11 attacks and the loss of several million jobs over the next several months, the corporate scandals, the uncertainty in the aftermath of 9/11 and the war in Iraq.
Investment was a weak spot in the economy in 2001 and 2002 and the beginning of 2003. After nine consecutive quarters of declining business investment, we have now seen eleven straight quarters of growth in investment averaging 8.7 percent.
REPORTS