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

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

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

A Tax Bias toward Mega-Corporations

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

Federal Capital Gains Tax Rates, 1988-2013

CBO: Tax Expenditures in the Eye of the Beholder

President Obama’s 2014 Budget Takes another Whack at Savers

Tax Policy Center Espouses Minority View on Capital Income Taxes

The Carried Interest Debate: Funding Government for 3.1 Hours

BEA: Personal Income Drops 3.6 Percent in January, the Most since the Clinton Tax Increase of 1993

The High Burden of State and Federal Capital Gains Taxes

Dislike Attempts to Double Tax Facebook

CBO Overly Optimistic about Economic Growth and the Federal Debt

Tax Policy Center Ignores the Most Basic Reasons for Reduced Taxes on Investment

The Investment Slump Continues

Measuring the Economic and Distributional Effects of the Final Fiscal Cliff Bill

Modeling the Economic and Distributional Effects of the Senate Tax Bill

The Fiscal Cliff in History

CRS, at odds with Academic Studies, Continues to Claim No Harm in Raising Top Earners Tax Rates

Fiscal Cliff: Capital Gains and Dividend Tax Increases Pose Greatest Threat to Economy