Correcting Obama and Buffett: U.S. Capital Taxes Among Highest in the OECD

 
 
September 20, 2011

(This blog post has been updated to reflect the latest OECD data for 2011. OECD revised its methodology for calculating U.S. dividend rates ).

During his Rose Garden speech yesterday, President Obama once again fueled the general misperception that people who pay the 15 percent tax rate on their capital gains and dividend income are paying a lower rate than salaried workers who pay at the individual rate (which ranges from 10 percent to 35 percent).

The reality is that capital gains and  dividends are taxed at a lower rate at the individual level because this income has already been taxed at 35 percent at the corporate level before it was distributed to shareholders. Both Mr. Obama and his tax advisor Warren Buffett seem unaware that the U.S. has the 4th highest overall tax rate on dividend income among the largest industrialized countries in the OECD at 52.1 percent. Only Denmark (56.5 percent), France (57.8 percent) and the United Kingdom (54 percent) tax dividends at a higher rate.

The U.S. tax rate on dividend income has come down considerably over the past ten years. In 2000, the U.S. had the 2nd highest combined tax rate on dividend income at 67.3 percent when dividends were taxed at the individual tax rate. The Bush administration cut the top dividend tax rate from 39.6 percent to 15 percent (the capital gains rate was also cut from 20 percent to 15 percent) which only slightly improved the U.S. ranking because so many other countries cut their corporate income taxes. Indeed, Great Britain is scheduled to cut their corporate tax rate next year to 23 percent, which will likely propel the U.S. dividend rate into the third highest ranking.

The tax rate on dividend and capital gains income for wealthy taxpayers is already scheduled to rise in 2013 because of the 3.8 percent tax on non-wage income that was enacted in Obama's health care legislation. This will push the overall rate on dividend and capital gains to over 50 percent. Obama's new "alternative minimum tax" on high-earners would push the rate even higher.

With the U.S. corporate tax rate already the 2nd highest in the industrialized world, the country can hardly afford to become such a hostile environment for capital income. 

Overall Statutory Tax Rates on Dividend Income
(Corporate & Individual Rate)

Country

2011 Rate

2011 Rank

2000 Rate

2000 Rank

Change in Rate 2000 to 2011

Change in Rank 2000 to 2011

Australia

46.5

11

48.5

19

-2.0

-8

Austria

43.8

14

50.5

16

-6.7

-2

Belgium

43.9

13

49.1

18

-5.3

-5

Canada

48.0

9

61.0

6

-13.0

3

Chile

42.2

20

45.0

22

-2.8

-2

Czech Republic

31.2

31

41.4

26

-10.2

5

Denmark

56.5

2

59.2

8

-2.7

-6

Estonia

21.0

33

26.0

34

-5.0

-1

Finland

40.5

21

29.0

32

11.5

-11

France

57.8

1

63.2

5

-5.4

-4

Germany

48.6

5

60.9

7

-12.3

-2

Greece

32.5

29

35.0

30

-2.5

-1

Hungary

32.0

30

55.7

11

-23.8

19

Iceland

36.0

24

37.0

29

-1.0

-5

Ireland

48.4

7

57.4

9

-9.1

-2

Israel

43.0

17

52.0

14

-9.0

3

Italy

36.6

23

44.9

23

-8.3

0

Japan

45.6

12

66.7

3

-21.1

9

Korea

47.8

10

44.6

24

3.1

-14

Luxembourg

42.5

18

52.2

13

-9.7

5

Mexico

30.0

32

35.0

30

-5.0

2

Netherlands

43.8

14

74.0

1

-30.3

13

New Zealand

33.0

28

39.0

28

-6.0

0

Norway

48.2

8

28.0

33

20.2

-25

Poland

34.4

26

44.0

25

-9.6

1

Portugal

42.3

19

51.4

15

-9.1

4

Slovak Republic

19.0

34

39.7

27

-20.7

7

Slovenia

36.0

24

47.5

21

-11.5

3

Spain

43.3

16

52.7

12

-9.4

4

Sweden   

48.4

6

49.6

17

-1.2

-11

Switzerland

36.9

22

56.5

10

-19.6

12

Turkey

34.0

27

65.0

4

-31.0

23

United Kingdom

52.7

3

47.5

20

5.2

-17

United States

52.1

4

67.3

2

-15.3

2

Simple Average=

41.1

49.3

Source: OECD tax database
http://www.oecd.org/dataoecd/26/51/33717596.xls

Buy this blogger a cup of coffee!

Sizes

Follow Us

About the Tax Policy Blog

Subscribe to Tax Foundation - Tax Foundation's Tax Policy Blog The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.

Monthly Archive

Privacy Policy