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

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

The Long Goodbye to U.S. Corporations

October 9, 2013

Despite What Jimmy Carter Thinks, Americans Live Better Today Than in the 1970s

October 8, 2013

The U.S. Ranks Second to Last in Investment among Developed Countries

September 24, 2013

“Red” China Taxes Capital Relatively Lightly

September 11, 2013

Why Eliminating Taxes on Capital Would Be Good for Workers

August 29, 2013

Do I Have to Pay Taxes on My Interest from My Savings Account?

August 22, 2013

Case Study #3: Reduced Tax Rates on Capital Gains and Qualified Dividends

July 31, 2013

A Tax Bias toward Mega-Corporations

July 10, 2013

The Higher Rate for Short-Term Capital Gains – a Questionable Policy Choice

June 26, 2013

Federal Capital Gains Tax Rates, 1988-2013

June 13, 2013

CBO: Tax Expenditures in the Eye of the Beholder

May 29, 2013

President Obama’s 2014 Budget Takes another Whack at Savers

April 10, 2013

Tax Policy Center Espouses Minority View on Capital Income Taxes

March 19, 2013