There is a hidden tax on millions of Texans that Washington, DC squeezes out of our hard-earned savings accounts every year. Often referred to as the phantom gains tax, the IRS currently taxes the savings growth of mutual funds held outside of 401(k)s and IRAs, even when the underlying fund is never sold. It’s worth repeating that these gains are not realized but reinvested in the fund by 95% of middle-class Texans, yet taxes flow to DC instead of going back into the economy or putting more savings into your family’s future.
Texans have been through a lot in the last four years. Inflation and reckless spending have raised costs for families across the state, making it harder to put food on the table, afford rent, or save for retirement. President Trump has already taken steps to address those problems. The cost of gas is down. The price of groceries is falling. And thanks to Trump’s leadership, Congressional Republicans are working to pass the president’s “One Big Beautiful Bill” that accomplishes his tax agenda. While the bill currently includes many of President Trump’s campaign promises, there is still more that Republicans in Washington can do to put dollars back into the pockets of Texans this year.
The people of Texas are hardworking. Folks here make sure to support their families and not rely on any government handouts to get by. However, the complicated tax rules that govern how more than half of Americans invest to secure their financial future make it difficult for Texans to grow their long-term investments, whether it’s planning for retirement or saving to buy a house.
Today, more than 120 million Americans nationwide have invested money in mutual funds, but 40 million of these savers face annual phantom gains – taxes that are unfair and costly. In Texas, more than half of the state’s residents are saving for retirement – their reward for being smart and responsible is a massive and unexpected tax bill. In 2022 alone, the IRS took $16 billion worth of these “phantom gains” out of Americans’ wallets, leaving them with a surprise tax bill on money that never actually hit their bank accounts. That’s not just ridiculous, it is completely unfair.
Instead of being forced to pay high costs every year on their mutual funds, Texans should be encouraged to save for their retirement, a down payment on a house, or the capital needed to open up a small business and build up financial stability for generations. Thankfully, two Texans are pushing for change. Senator John Cornyn and Rep. Beth Van Duyne are leading the charge by pushing colleagues in Washington to support a solution that would do just that by introducing the Generating Retirement Ownership Through Long-Term Holding (GROWTH) Act.
The bill would defer capital gains taxes on reinvested earnings until their owners sell those shares. In essence, it would make sure that Texans don’t get a surprise bill from the federal government for saving for their future. Making this change would not only simplify our currently overcomplicated tax code, but it would also save millions of Texans their hard-earned money.
The GROWTH Act will get the government out of the way and put the financial future of Texans into their own hands, allowing them to make their own smart financial decisions. This bill would level the playing field for the teachers, ranchers, nurses, and small business owners who carefully invest for decades and don’t deserve to have their hard-earned money taken from them unfairly by the government.
In the coming months, Republicans in Congress have the opportunity to deliver this much-needed relief to Americans. The GOP is already considering President Trump’s Big Beautiful Bill focused on simplifying the tax code and cutting costs for Americans. The GROWTH Act would address a glaring issue in our tax code and solve a problem that desperately needs fixing.
Senator Cornyn has built his career on his work for fiscal conservatism and Texas values. Getting this bill done is a no-brainer and falls directly in line with those priorities and would protect taxpayers’ money while getting the government out of the pocketbooks of everyday Texans.
This isn’t something that can wait. Texans need this relief now. Senator Cornyn should continue the fight to make sure the GROWTH Act is included in Trump’s One Big Beautiful Bill and deliver for millions of Texans. It’s time for Senate Republicans to deliver for the people who truly need it.
Frank Corte, Jr. served in the Texas House from 1993-2011.