Joint Economic Committee Calls For Changes To US Mutual Fund Taxation

by Philip Morton, Investors Offshore.com

21 February 2002

A study released last week by the Joint Economic Committee in the United States has recommended that laws governing the taxation of mutual funds should be changed.

'The Mutual Fund Industry: An Overview and Analysis' documents the advantages of mutual fund investment for US investors, and reveals that factors such as liquidity, diversification, professional management, and economies of scale have all contributed to the phenomenal growth of the industry over the past few decades.

The Chairman of the Committee, which is composed of representatives from both Houses, explained the study's findings: 'They have become a favorite investment vehicle for the middle class, and this appeal has fueled the phenomenal growth of the mutual fund industry,' Jim Saxton observed.

However, he pointed to the current taxation of capital gains distributions in the US as one of the major disadvantages to mutual fund investment, and warned that many investors are being discouraged by the fact that they are subject to tax on capital gains distributions even if their mutual fund shares fall in value.

Mr Saxton revealed that he has introduced legislation designed to change the tax treatment of mutual fund investment, and added that he was: 'hopeful that the tens of millions of middle class investors subjected to this unfair tax will benefit from this legislation before too long.'

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