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

Frequently Asked Questions About the Bush Tax Cuts

May 26, 2010

Health Care Summit Will Probably Avoid Tax Talk

February 25, 2010

The Tax Suspense Is Killing Us

January 28, 2010

New Podcast: Rep. Dave Camp on Tax Reform

January 13, 2010

Obama Should Take a Tax Policy Hint from Europe on Jobs and Economic Growth

December 15, 2009

New Podcast: Congressman Tom Price (R-GA) – Obama Budget vs. GOP Alternative

April 8, 2009

New Podcast: David Harsanyi of the Denver Post – The Politics of Taxes and Fiscal Policy in Colorado

March 18, 2009

Tax Foundation Research Plastered in Editorial Sections This Week

March 12, 2009

New Podcast: Congressman Paul Ryan (R-WI) – Tax, Monetary and Entitlement Policy Reform

March 4, 2009

People Scramble in Advance of Expected Tax Hikes

November 5, 2008

Did 1997 Capital Gains Tax Exclusion for Housing Contribute to Economic Crisis?

September 25, 2008

Tax Plan Floated as Bailout Alternative

September 24, 2008

Questions About the Obama Tax Plan

August 14, 2008

What Capital Gains Tax Rate Does Obama Favor?

August 11, 2008

Would Obama’s Tax Plan Cost Jobs?

August 7, 2008

Capital Gains Tax Continues to Roil Economic Debate on Anniversary of Bush Tax Cut

May 27, 2008

Presidential Campaigns to Address Major Domestic Policy Issues

April 28, 2008

Obama and Gibson Capital Gains Tax Exchange

April 17, 2008

Capital Gains Taxes and Inflation

July 31, 2007

New Tax Foundation Primer on Investment Income Taxation

July 17, 2007