Ensuring Tax Fairness and Financial Security

ICI advocates for commonsense tax policies that benefit regulated funds and individual investors.

Millions of Americans save for the future through mutual funds and long-term investments. As Americans try to keep up with rising costs, ICI is advocating for policies to help them keep more of their hard-earned money. But every tax season, mutual fund investors are unfairly penalized with a tax bill for capital gains they didn’t actually receive.

Key Takeaways:

  • Millions of American investors are losing potential returns on their investments because unfair taxes on mutual funds penalize them even if they don’t sell a single share.
  • The GROWTH Act will end this penalty, finally treating these investments the same as stocks, real estate, or other assets.
  • Investors are losing up to 13.4% in returns on an investment over a 10-year period, depending on the type of mutual fund, according to ICI research.
  • The penalty discourages long-term investing, which is bad for our economy.
  • Congress should pass the GROWTH Act to end this unfair tax penalty, support long-term investing, and help regular Americans retain more of their hard-earned returns.

 

Under current law, investors in mutual funds and other registered funds held outside of retirement accounts must pay taxes each year on capital gains distributions—even if they didn’t sell a single share, and even if those gains were reinvested automatically. That means they’re being taxed on money they never really saw, and that tax burden denies them up to $1,340 in returns (on a $10,000 investment in an actively managed mutual fund over a 10-year period).
 
The bipartisan GROWTH Act, introduced in the House and Senate, would let investors defer taxes on automatically reinvested capital gains distributions until they sell their shares—just like people who invest directly in stocks or bonds. Passing the GROWTH Act will end the unfair penalty on millions of investors who rely on mutual funds and other registered funds in their taxable accounts. These Americans should not lose out for doing exactly what policymakers say they should do: saving for the future in well-regulated, diversified investment vehicles.

The GROWTH Act Would Benefit Millions of Americans

According to ICI's Ownership of Mutual Funds and Shareholder Sentiment, 2025 report, 24.8 million households owned mutual funds in taxable accounts in 2025.

The GROWTH Act would largely benefit middle-class Americans, seniors, and retirees:

  • More than 50% of the impacted households have less than $150,000 in household income.
  • 45% of households holding long-term mutual funds are 65 or older.
  • 13.4% more in returns in investors’ pockets after 10 years, on certain investments. 
     

Key Resources: