Business Capital Gains and Dividends Taxes

The taxation of dividends and capital gains is one of the most controversial issues in public finance. Relatively high effective tax rates on capital income, particularly that emanating from the corporate sector, have the potential to discourage investment and impede economic growth.

Corporations must pay corporate income taxes on profits before they distribute dividends to shareholders, and shareholders pay an additional, individual-level tax on those amounts. Imposing two layers of taxation on corporate income can result in a total tax rate on capital income from corporations that is substantially higher than the rate on other types of income.

In recent years, policymakers have become concerned about the economic damage caused by relatively high effective tax rates on capital income, and in 2003 the tax rate on capital gains and dividend income was lowered to 15 percent.


Featured Research

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

Joe Biden’s 61 Percent Tax on Wealth

April 29, 2021

Options for Reforming America’s Tax Code 2.0

April 19, 2021

Facts and Figures 2021: How Does Your State Compare?

March 10, 2021

Tracking the 2020 Presidential Tax Plans

October 21, 2020

President Trump Outlines Second Term Tax Ideas

August 25, 2020


Related Articles

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

New Research Suggests Estimates of Wealth Inequality Likely Overstated

July 15, 2021

Biden’s Top Marginal Capital Gains Tax Rate Would Be Highest in OECD

July 6, 2021

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

Details and Analysis of President Biden’s FY 2022 Budget Proposals

June 16, 2021

Taxing Consumption Progressively Is a Better Way to Tax the Wealthy

June 8, 2021

Savings and Investment: The Tax Treatment of Stock and Retirement Accounts in the OECD

May 26, 2021

Dividend Tax Rates in Europe

May 13, 2021

U.S. Top Combined Integrated Tax Rate on Corporate Income Would Become Highest in the OECD

May 3, 2021

Joe Biden’s 61 Percent Tax on Wealth

April 29, 2021

Federal Capital Gains Tax Collections, Historical Data (1954-2018)

April 26, 2021

Biden’s Proposed Capital Gains Tax Rate Would be Highest for Many in a Century

April 26, 2021

Top Combined Capital Gains Tax Rates Would Average 48 Percent Under Biden’s Tax Plan

April 23, 2021

Capital Gains Tax Rates in Europe

April 22, 2021

Options for Reforming America’s Tax Code 2.0

April 19, 2021

Facts and Figures 2021: How Does Your State Compare?

March 10, 2021

New Hampshire Bill Aims to Reduce Tax Burden on Businesses

March 4, 2021

Spain’s Recovery Budget Comes with Tax Hikes

October 30, 2020

Tracking the 2020 Presidential Tax Plans

October 21, 2020

Recent Changes in Dividend Tax Rates in Europe

October 1, 2020