U.S. Taxpayers Face the 6th Highest Top Marginal Capital Gains Tax Rate in the OECD
The current federal top marginal tax rate on long-term capital gains in the United States is a total of 23.8 percent (20 percent plus a 3.8 percent tax to fund the Affordable Care Act) for taxpayers with adjusted gross incomes of $200,000 ($250,000 married filing jointly) or more. In addition, states and some localities levy taxes on capital gains income, which range from zero percent in states with no individual income tax, such as Florida, Texas, South Dakota, and Wyoming, to 13.3 percent in California.
An individual who has capital gains income is subject to both federal and state capital gains taxes. Taking into account the federal deductibility of state taxes and the phase-out of itemized deductions, the average top marginal capital gains tax rate faced by U.S. taxpayers is 28.6 percent.
This is the 6th highest rate in the OECD. Taxpayers in most OECD countries face much lower capital gains tax rates than their counterparts in the United States. Only taxpayers in Denmark (42 percent), France (34.4 percent), Finland (33 percent), Ireland (33 percent), and Sweden (30 percent) face higher rates. The U.S. rate is about 10 percentage points higher than the OECD average (18.4 percent) and 5 percentage points higher than the weighted average (23.2 percent). Nine OECD countries full-exempt most capital gains income.
The United States currently places a heavy tax burden on saving and investment with its capital gains tax. The U.S.’s top marginal tax rate on capital gains, combined with state rates, far exceeds the average rates faced throughout the industrialized world. Increasing taxes on capital income, as suggested in the president’s recent budget proposal, would further the bias against saving, leading to lower levels of investment and slower economic growth. Lowering taxes on capital gains would have the reverse effect, increasing investment and leading to greater economic growth.
To learn more about capital gains taxes see our new paper: “The High Burden of State and Federal Capital Gains Tax Rates in the United States.”
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Top Marginal Tax Rate on Capital Gains, by OECD Country, 2015 |
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|
Rank |
Country |
Rate |
|
|
1 |
Denmark |
42.0% |
|
|
2 |
France |
34.4% |
|
|
3 |
Finland |
33.0% |
|
|
3 |
Ireland |
33.0% |
|
|
5 |
Sweden |
30.0% |
|
|
6 |
United States |
28.6% |
|
|
7 |
Portugal |
28.0% |
|
|
7 |
United Kingdom |
28.0% |
|
|
9 |
Norway |
27.0% |
|
|
9 |
Spain |
27.0% |
|
|
11 |
Italy |
26.0% |
|
|
12 |
Austria |
25.0% |
|
|
12 |
Germany |
25.0% |
|
|
12 |
Israel |
25.0% |
|
|
12 |
Slovak Republic |
25.0% |
|
|
16 |
Australia |
24.5% |
|
|
18 |
Canada |
22.6% |
|
|
19 |
Estonia |
21.0% |
|
|
20 |
Japan |
20.3% |
|
|
21 |
Chile |
20.0% |
|
|
21 |
Iceland |
20.0% |
|
|
23 |
Poland |
19.0% |
|
|
25 |
Hungary |
16.0% |
|
|
26 |
Greece |
15.0% |
|
|
27 |
Mexico |
10.0% |
|
|
28 |
Belgium |
0.0% |
|
|
28 |
Czech Republic |
0.0% |
|
|
28 |
Korea |
0.0% |
|
|
28 |
Luxembourg |
0.0% |
|
|
28 |
Netherlands |
0.0% |
|
|
28 |
New Zealand |
0.0% |
|
|
28 |
Slovenia |
0.0% |
|
|
28 |
Switzerland |
0.0% |
|
|
28 |
Turkey |
0.0% |
|
|
OECD Simple Average |
18.4% |
||
|
OECD Weighted Average |
23.2% |
||
|
Source: Ernst and Young and Deloitte Tax Foundation Calculations. |
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