February 14, 2006
js-4048

The Honorable John W. Snow
Statement on Extension Lower Tax Rate
on Capital Gains and Dividends

"I commend the U.S. Senate for resisting misguided calls to increase taxes. Today's Senate vote to support an extension of the President's lower rates on capital gains and dividends was a step in the right direction toward lower tax rate permanency, which is vital to maintaining the strength of the American economy: 3.5 percent growth rate, more than 4.7 million new jobs, and unprecedented Federal revenues of $2.15 trillion.

"We know that you always get less of something you tax. By lowering the taxes on capital, the Jobs and Growth Act of 2003 encourages increased long-term investment. Increased long-term investment in turn improves the long-turn outlook of the economy. It makes the economy more productive. With additional capital, labor output rises. And with rising labor output the demand for labor increases and living standards rise.

"Since the President signed the Jobs and Growth Act of 2003, we have seen a remarkable turn-around in the US economy, and unemployment is quite low. After nine consecutive declining quarters of real annual business investment, we have had ten straight quarters of rising business investment. While many factors contributed to the improved performance of the economy, the tax reductions on capital have been at the heart of the progress we have seen. By lowering the cost of capital the President's proposals improved the inherent efficiency of the economy, and this will prove effective for both the short and long term.

"I encourage the House and Senate Conferees to extend the 15 percent rate on capital gains and dividends that was put in place by the Jobs and Growth Act of 2003 indefinitely. Congress owes this to all Americans who benefit from a strong and growing economy.

"If Congress fails to extend the 15% rate on capital gains and dividends, the effective increase would strike at the heart of the American economy with damaging long-term effects on economic growth. A slow down in investment would be inevitable, and a slow-down in job growth more than likely to follow."

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