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'Growth' Act Keeps Retirement Funds Working

Crapo-Johnson bill defers taxes on mutual fund investments

Washington, DC. - People investing for retirement through the use of mutual funds should not pay capital gains taxes until those shares are sold, according to Senators Mike Crapo (R-Idaho) and Tim Johnson (D-South Dakota). To keep retirement savings earning more money for a longer period of time, Crapo and Johnson have introduced the GROWTH (Generate Retirement Ownership Through Long-Term Holding) Act.

Crapo, a member of both the Senate Finance and Banking Committees; and Johnson, a member of the Senate Banking Committee, say the premise behind the bipartisan legislation is simple: allow investors to keep their money working instead of removing part of it each year because of capital gains taxes paid on growth in mutual funds. The GROWTH Act allows investors in mutual funds to be treated the same as those investing in the stock market-they pay taxes only when shares are sold.

"The current tax policy is unfair because investors are taxed even though they have not sold their shares," Crapo said. "Deferring taxes on reinvested mutual fund capital gains distributions until the investor sells their fund shares would allow investors to let their money work longer toward building personal savings goals, including retirement health care costs, and education. I appreciate partnering with Sen. Johnson on this bill and look forward to working with him on other ways to modernize our financial markets."

"After the market decline last year, many investors found themselves in the unfortunate situation of paying capital gains taxes on their reinvested dividends even as their fund accounts lost value. This proposal would allow investors to defer capital gains taxes, not reduce or eliminate them. This is key to helping investors to rebuild their nest eggs. This legislation would help millions of American savers fund their future health, education, and retirement goals. I am pleased to be reintroducing this bipartisan legislation with Sen. Crapo to aid Americans who are working to rebuild and secure their financial futures," Johnson said.

Crapo and Johnson argue the changes benefit both investors who are able to grow their retirement funds and the nation's financial markets, which enjoy the security brought from long-term investment.
The Senators note that, among owners of mutual funds, more than 90 percent are investing for retirement. This marks the third time that the legislation has been introduced.