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

CBO Report Shows Increasing Redistribution in the Tax Code Despite No Long-term Trend in Income Inequality

Top 20 Percent of Households Pay 94 Percent of Income Taxes

Capital Gains Rate By Country, 2011 (OECD)

The Fortunate 400

Why Capital Gains are taxed at a Lower Rate

High-Tax Europe Heading into another Great Depression

How Might Berkshire Benefit from the Buffett Rule?

Fate of Bush Tax Cuts Uncertain As Expiration Approaches

Buffett Rule is really an Anti-Corporate Rule

Romney’s New Tax Plan a Significant Improvement

Fix the Current AMT Before Creating a New One

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

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

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

Overreaching: Time to Reconsider FATCA

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

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

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

Mad Men and Taxes (No Spoilers!)

Federal Capital Gains Tax Collections, 1954-2009