Ten Reasons to Reform the Tax Code: Reason #8
High capital gains taxes hurt job creation, pay raises, and economic growth.
Uncompetitive double tax. During the Obama administration, the top tax rate on capital gains and dividends surged from 15 percent to 23.8 percent, including Obamacare taxes. While this rate appears lower than rates that apply to ordinary income, capital gains face other layers of taxation, including corporate taxes paid on stock, the effects of inflation, or both. When all federal and state taxes on capital gains are included, the United States has the second-highest combined capital gains rate in the developed world at 56.3 percent, making investments in American employers less attractive.
Economic damage. By lowering the return on investment and reducing capital formation, high capital gains taxes hurt American households through:
- Lower wages that result from less productivity;
- Fewer entrepreneurs and jobs (an average of 6 jobs are created by each startup); and
- Less economic growth and opportunity.
Tax reform should reduce the burden of capital gains double taxation to boost wages, jobs and opportunity for American workers.
