The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
The complete article with the table is available in PDF format.
Fewer than one in seven individual income taxpayers reported taxable capital gains in 2006. Over half of taxpayers with gains had incomes below $75,000, but most capital gains were reported by very high income taxpayers. The 3 percent of returns with AGI over $200,000 reported 31 percent of AGI and 83 percent of capital gains; the 0.3 percent with AGI over $1,000,000 reported 15 percent of AGI and 61 percent of capital gains. Many more Americans accrue capital gains on corporate shares they hold within tax-deferred employer-sponsored retirement plans, but they do not pay capital gains tax on these gains.
Capital Gains Tax
The taxation of capital gains has once again become an
issue in the presidential campaign. Presumptive Democratic
presidential nominee Sen. Barack Obama of Illinois
has proposed to reverse most of the cut in capital gains
taxes since 1997 for individuals in the top two rate
brackets, increasing the rate from 15 percent to 20 percent
or more. Presumptive Republican presidential nominee
Sen. John McCain of Arizona has claimed that higher
capital gains taxes would affect millions of middleincome
Fewer than one in seven individual taxpayers report
taxable capital gains in any year. In 2006 just 13.4 million
out of 138.3 million taxpayers reported taxable net gains
(net long-term gains in excess of net short-term capital
losses and capital gains distributions, which are taxed at
favorable capital gains rates) on Schedule D, and another
4.6 million reported capital gains distributions from
mutual funds on their Forms 1040. Many taxpayers with
gains had modest incomes ? more than half (52 percent)
of those with taxable net gains or capital gains distributions
had incomes below $75,000. But high-income taxpayers
accounted for the overwhelming share of capital
gains (Table 1). The 3 percent of tax returns with adjusted
gross income exceeding $200,000 reported 31 percent of
AGI and 83 percent of capital gains. The 0.3 percent of
returns with AGI exceeding $1 million reported 15 percent
of AGI and 61 percent of capital gains. Capital gains
represented less than 4 percent of AGI for gains recipients
with income less than $200,000, but about 40 percent of
AGI for those with income exceeding $1 million.
Many more Americans accrue capital gains on corporate
shares they hold within tax-deferred employersponsored
retirement saving plans or individual
retirement accounts. But capital gains from stock sales
within those accounts are not subject to capital gains tax.
Accruals within those accounts are tax free until distributed
and then are taxed as ordinary income.
(End of text. The complete article with the table is available in PDF format.
Usage and reprints: Most publications may be downloaded free of charge from the web site and may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact email@example.com.
If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.
Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute.