More than 450 organizations call on Congress to maintain tax rate on investments

House and Senate lawmakers on Monday received a letter from 453 organizations urging them to maintain the 15 percent tax rate on capital gains and dividends. 

Absent congressional action, the capital gains tax rates next year jump to 20 percent while the tax on dividends skyrockets to as high as 39.6 percent. This increase is in addition to the upcoming 3.8 percent tax on investments that is a part of the new healthcare law. 

The letter states that allowing these tax rates to increase will result “in one of the largest tax increases in U.S. history.” 

“Increasing taxes on capital gains and dividends could derail America’s fragile economic recovery,” the letter states, adding, “We urge Congress to remove the uncertainty over this looming tax increase and maintain the 15 percent tax rate on capital gains and dividends. Now is not the time to discourage investment but to work together to keep the economy on the road to recovery.” 

Tax-writers in both chambers are grappling with how to keep the investments at the same tax rate. A key question is offsetting the difference between taxing dividends at a 20 percent rate instead of ordinary income rates, which go as high as 39.6 percent. 

Allowing the tax rates to split could have negative consequences for investors like senior citizens who depend on dividends to pay living expenses.

The tax on capital gains and dividends is slated to reset in January.