Center for Federal Tax Policy

Individual 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.

Related Articles

How Might Berkshire Benefit from the Buffett Rule?

April 30, 2012

Fate of Bush Tax Cuts Uncertain As Expiration Approaches

April 11, 2012

Buffett Rule is really an Anti-Corporate Rule

April 10, 2012

Romney’s New Tax Plan a Significant Improvement

February 24, 2012

Fix the Current AMT Before Creating a New One

January 31, 2012

Reversal of the Trend: Income Inequality Now Lower Than It Was Under Clinton

January 30, 2012

“Buffett Rule” Will Boost Top Dividend Rate to Over 62%, Highest in OECD

January 27, 2012

Income Inequality went Up 12 Percent under Clinton, Zero under Bush

January 20, 2012

Overreaching: Time to Reconsider FATCA

December 2, 2011

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

September 20, 2011

Big question left for 2010: What about the tax cuts?

November 7, 2010

If I-1098 Passes, High-income Taxpayers in Washington State Should Realize Capital Gains in December

October 22, 2010

Mad Men and Taxes (No Spoilers!)

October 18, 2010

Older Taxpayers Earn Lion’s Share of Capital Gains Income

July 15, 2010

Seniors Earn Lion’s Share of Dividend Income According to New IRS Data

July 14, 2010

The Economic Effects of the Lower Tax Rate on Dividends

June 7, 2010

U.S. Would Have Highest Dividend Tax Rate

June 7, 2010

Capital Gains: Congress’s Immoral, Irrational, and Unconstitutional Tax?

June 3, 2010

List of Tax Provisions Scheduled to Expire on December 31, 2010

May 26, 2010

Frequently Asked Questions About the Bush Tax Cuts

May 26, 2010