FOR IMMEDIATE RELEASE
April 28, 2021
Contact: Devin Miller
WASHINGTON, DC – The National Venture Capital Association (NVCA) was disappointed to see that the American Families Plan, unveiled by the White House today, includes unprecedented tax increases on long-term capital gains. Such a significant increase to capital gains rates will reduce long-term investment and entrepreneurship by making short-term economic activity relatively more attractive.
“Taxing capital gains at ordinary income rates undercuts President Biden’s own Build Back Better agenda,” said Bobby Franklin, President and CEO of NVCA. “The President’s agenda relies on catalyzing long-term private investment activity to solve critical societal challenges such as climate change, access to economic opportunity across regions and in underrepresented communities, and countering the rise of China, areas where we are excited to partner with the administration. But the tax increases on capital gains, including carried interest, undercut this effort by specifically targeting the very entrepreneurs and long-term investment funds whose participation will ultimately determine whether the Build Back Better agenda is successful. We urge the administration not to take one step forward and two steps back on encouraging long-term investment and innovation activity, but to set aside these tax increases and instead collaborate with the startup ecosystem to achieve shared objectives.”
Separate from these anti-innovation tax increases, the administration is making a bold bet with the American Jobs Plan, and we stand ready to do our part to support progress on these challenges, as we explain here.
A lower tax rate for long-term capital gains has been a part of the U.S. tax code for virtually the entirety of its existence, through Democratic and Republican administrations and liberal and conservative eras. By creating a preference for long-term value creation over short-term profit-seeking, U.S. long-term capital gains tax policy encourages entrepreneurship and economic dynamism. In addition, the capital gains rate differential is one of our most effective anti-monopoly policies; eliminating the differential will lead to greater economic concentration by increasing taxes on the economic incentive to start new companies and reducing capital available to entrepreneurs.
The consequence of this long-standing policy is that we are the most innovative and entrepreneurial society in the world and have been leaders in most new technological innovation in the post-WWII economy. In fact, the only decade where the U.S. had a federal long-term capital gains tax rate in excess of 30 percent was the 1970s, a decade known for significant economic challenges.
About National Venture Capital Association
The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the US venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.