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

2014 International Tax Competitiveness Index

September 15, 2014

How Much Lower are Canada’s Business Taxes?

August 26, 2014

Higher Incomes Should Be Our Policy Focus

August 26, 2014

What Would Piketty’s 80 Percent Tax Rate Do to the U.S. Economy?

July 28, 2014

Should a Capital Gain be Considered Income?

July 11, 2014

The Common Misconception about the Lower Rate on Capital Gains and Dividends

June 2, 2014

Top 10 things to Know about Investment and Tax Policy

May 16, 2014

Good Tax Policy Helped Canada Become Home to the World’s Most Affluent Middle Class

May 2, 2014

New Study Ponders Elimination of the Corporate Income Tax

April 11, 2014

How People Respond to Investment Taxes and What This Means for Economic Growth

March 24, 2014

Are Capital Gains and Dividend Income Tax Rates Really Lower Under the Camp Tax Reform Plan?

March 6, 2014

The United States’ High Tax Burden on Personal Dividend Income

March 5, 2014

The Basics of Chairman Camp’s Tax Reform Plan

February 26, 2014

Four Things to Look for in Chairman Camp’s Tax Reform Plan

February 25, 2014

The High Burden of State and Federal Capital Gains Tax Rates

February 11, 2014

New Year, New Report by CRS Claiming Taxes Have no Effect on Economic Growth

January 7, 2014

Baucus Goes to China

December 19, 2013

Top Capital Gains Tax Rate, OECD, 2011 – 2014

December 16, 2013

12 Steps for Economic Growth

October 30, 2013

Twelve Steps toward a Simpler, Pro-Growth Tax Code

October 30, 2013