OPINION:
Millions of Americans plan for their futures every day and trust investments such as mutual funds to help them increase their savings, prepare for their golden years, and build financial security for their families. However, many of these investors face an unfair surprise each year: a tax bill for gains they never chose to realize and never actually saw in their wallets.
Congress now has the opportunity to fix this. The bipartisan Generating Retirement Ownership Through Long-Term Holding (GROWTH) Act of 2025, introduced by Reps. Beth Van Duyne, Texas Republican, and Terri Sewell, Alabama Democrat, would correct a long-standing inequity in the tax code and put more money in the hands of millions of Americans and the real economy.
More than 40 million Americans own mutual funds in taxable accounts. These investments are designed to increase wealth over time, but outdated tax rules hurt that growth.
Mutual fund investors in taxable non-retirement accounts, such as with a brokerage firm or financial adviser, must pay taxes each year on any distributions from the fund, even if they don’t sell their shares, and even if they automatically reinvest the distributions back into the fund.
Funds must pass through (distribute) their annual net income, such as interest, dividends and capital gains, to investors as part of their tax structure. Under current law, these distributions are taxable that year, even if the investor automatically reinvests them into the fund. This happens even in years when the fund loses money, even to people who have bought in the previous month. Capital gains distributions can seem especially unfair because they are often paid to shareholders who weren’t invested in the fund when the assets generating those gains appreciated or when the assets were sold outside their control.
This phenomenon forces regular investors to pay taxes on gains they don’t choose to realize and on distributions they reinvest. Most don’t even receive the money. So investors might view their automatic reinvestment as a vote of confidence in the power of compound growth, but when April rolls around, they still owe taxes on that money.
That’s not just confusing; it’s also unfair.
The GROWTH Act would correct this. Under the bill, investors in mutual funds and other registered funds would be allowed to defer taxes on distributions that are automatically reinvested until the investor sells their shares.
In other words, fund investors would be treated similarly to those who hold individual company stock or bonds directly, since capital gains taxes aren’t triggered until the investors sell. That’s a fundamental principle of tax fairness, and the GROWTH Act would finally extend it to tens of millions of Americans.
The GROWTH Act would make long-term investing less expensive and more accessible by reducing tax friction and allowing gains to compound. It would help Americans save more, invest smarter and keep more of their hard-earned dollars.
At a time when Americans are concerned about their financial futures, we should make it less expensive to save and grow nest eggs. The GROWTH Act would support a system of long-term savings, level the playing field and empower everyday investors to build wealth.
Congress has a chance to meaningfully change the lives of millions of American investors, including teachers, nurses, small-business owners and many other hardworking Americans who are planning for tomorrow.
Let’s give all American investors the fair shot they deserve.
• Tiffany Smiley is the founder of Endeavor PAC and a former U.S. Senate candidate.
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