Oklahomans have been hurt by many financial uncertainties throughout the last four years. Rampant inflation has drained families’ savings accounts and forced folks across the state to make tough decisions about how to pay for rent, afford groceries, or save for retirement. President Trump has taken steps to alleviate these pains, and Congressional Republicans are working hard to pass the president’s One Big Beautiful Bill.
Though this bill includes plenty of President Trump’s campaign promises, there is more that Republicans can do to put money back in the wallets of Oklahomans today to fix a broken tax code that favors certain savings accounts over others, and would end the era of surprise mutual fund tax bills.
Oklahomans make up a vital part of the 120 million Americans who use mutual funds to build savings towards a home, a car, or a secure retirement. Unfortunately, Oklahomans who’ve done the right thing by saving for retirement are often hit with an unfair and unexpected tax bill from the IRS – taxed on annual gains in their mutual funds that never even reach their wallets.
This penalty is called the “phantom gains tax,” with the IRS taxing the earned savings of mutual funds, despite the fact that those savings are reinvested by the vast majority of Americans and only realized years or decades down the road when the mutual fund is sold. At a time when middle-class families need every dollar now for gas, groceries, and school supplies this is money that is better used today in the economy versus being directed to Washington, DC. Across the country, 40 million Americans are hit by the IRS’s phantom gains tax every year. In 2022, this led to $16 billion being diverted from taxpayers to the IRS.
Thankfully, there is a bill that rights this wrong-headed policy called the Generating Retirement Ownership Through Long-Term Holding (GROWTH) Act.
The GROWTH Act would stop surprise IRS bills and make Americans’ money work better and longer for them by preventing the government from taxing mutual funds until they are sold. This simple change would fix a glaring hole in our complicated tax and savings system and save millions of dollars for hard-working Oklahomans.
Leading members of the Trump administration have urged Congress to pass laws to accomplish exactly what the GROWTH Act sets out to do. Deputy Treasury Secretary and Acting IRS Commissioner Michael Faulkender argued recently that phantom gains taxes harm everyday Americans, pointing out that “Capital gains should be deferred until it is realized versus when the fund does a re-balancing. Other investment products do this and there needs to be some [fairness] there. We need to get this done.”
It is reassuring to know that senior Trump administration officials hold this belief, but Congress must put the president’s priorities into law. With the GOP working to pass President Trump’s One Big Beautiful Bill and simplifying the tax code, it is imperative that they include the GROWTH Act in that package to address the glaring issue that the phantom gains tax presents.
Senator Lankford and Senator Mullin have a golden opportunity to put money back in the pockets of middle-class families, retirees, and small business owners throughout Oklahoma. They can deliver on protecting taxpayers’ money and get the government out of the wallets of everyday Oklahomans. This isn’t a bill that can wait – people need this relief now. Senate Republicans can deliver that desperately needed relief by adding the GROWTH Act to the One Big Beautiful Bill.
About the author: Jessica Garvin is a former State Senator and Small Business Owner