Preferential Capital Gains Tax Rates

Research Report

Preferential Capital Gains Tax Rates

Abstract

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) cut the top tax rate on long-term capital gains from 20 percent to 15 percent, the lowest level since World War II. JGTRRA also cut the rate on dividends to 15 percent; previously dividends had been taxed as ordinary income. In contrast, capital gains have been taxed at lower rates than ordinary income for most of the history of the income tax. And reductions in capital gains tax rates have usually corresponded with reductions in tax rates on ordinary income.

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