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

What Dynamic Analysis Tells Us About the President’s Tax Hike on Capital Gains and Dividends

Representative Van Hollen’s Tax and Income Redistribution Proposals

Shareholders Don’t Like High Taxes Either

How One Can Face an Infinite Effective Tax Rate on Capital Gains

WSJ’s CEO Council Emphasizes Importance of Tax, Fiscal Policy Reform

FATCA, Automatic Information Exchange, and the End of Financial Privacy

Tax Policy Is Child’s Play

A Visual Guide to Business, Taxes, and the Economy

Business In America Illustrated

The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class

Entrepreneurship and a Pro-Growth Tax Code

Why do I have Four Different Retirement Accounts?

2014 International Tax Competitiveness Index

How Much Lower are Canada’s Business Taxes?

Higher Incomes Should Be Our Policy Focus

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

Should a Capital Gain be Considered Income?

What are Capital Gains Taxes?

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

Top 10 things to Know about Investment and Tax Policy