Lawmakers Propose GROWTH Act to Alleviate Tax Burden on Investors

The American investment landscape may soon see significant changes as lawmakers have proposed the Generating Retirement Ownership Through Long-Term Holdings (GROWTH) Act. This legislation aims to provide relief to nearly 40 million mutual fund investors who are currently facing unfair tax liabilities on earnings they have not actually received.

The issue stems from existing federal laws that impose annual taxes on mutual fund shareholders for gains, dividends, and interest, regardless of whether they have sold their shares. According to the Investment Company Institute, “Mutual fund shareholders outside of tax-preferred accounts are taxed annually on distributions of gains, interest, and dividends, despite not having sold their shares.” This creates a disparity for mutual fund investors compared to those who invest in individual stocks, where capital gains taxes are only incurred when profits are realized.

Senator John Cornyn, along with Representatives Beth Van Duyne and Terri Sewell, introduced the GROWTH Act earlier this year. Cornyn highlighted the need for this reform, stating that deferring taxes on reinvested mutual fund capital gains until an investor sells their shares is a straightforward solution. He emphasized that this change would allow hardworking Americans to let their investments grow longer, ultimately building toward their retirement goals and creating generational wealth.

The current tax structure has left many investors bewildered. Most individuals, including those without extensive financial expertise, believe that they should not owe taxes on earnings they have not withdrawn. Many are unaware of their tax obligations until faced with a bill during tax season, adding unnecessary stress to the investment process.

Despite the apparent benefits of the GROWTH Act, the legislative path ahead is fraught with challenges. Lawmakers had the opportunity to incorporate this act into a broader spending and tax bill passed in the summer, but it was not included. Now, as Congress prepares for the 2026 election year, the window for passing new legislation narrows. Lawmakers will likely focus on their re-election campaigns, making substantial legislative efforts more complicated.

Introducing the GROWTH Act as a standalone measure could provide a positive narrative for lawmakers on the campaign trail. A tax cut, especially one aimed at helping everyday Americans, could resonate well with voters. By prioritizing this bill, Congress could alleviate the tax burdens on millions of investors and foster a more supportive environment for long-term financial planning.

As the legislative session continues, the focus remains on whether Congress will act swiftly to support the GROWTH Act. Passing this legislation would reflect a commitment to enhancing the investment climate for average Americans, ensuring that they can invest in their futures without the fear of unexpected tax liabilities.

Leif Larson, the author of this commentary, has two decades of experience in public relations, public affairs, and politics. He has played a significant role in supporting numerous political, corporate, and advocacy groups throughout his career. The views expressed here are solely those of the author and do not reflect the official position of any organization.