June 26, 1998 05:38 PM | | Bookmark and Share

With all the persistent talk in Washington about cutting taxes even further on profits from selling stocks and bonds, it might be useful to point out who pays those “capital gains taxes” under current law. The attached table provides details. A few items stand out:

  • Just over two-thirds of American taxpayers make less than $50,000 a year. Their average federal income tax in 1999 will come to $1,045. Of that, only $12–or 1.2%–represents taxes on capital gains.
  • Just over a fifth of all taxpayers make between $50,000 and $100,000. Their average income tax on capital gains is $179–which is only 2.3% of their total federal income tax.
  • In contrast, 2% of all taxpayers make more than $200,000 a year. The average income tax paid on capital gains by this top-income group is $20,675. Overall, taxpayers making more than $200,000 now pay more than three-quarters of all income taxes paid on capital gains.
Who Pays Capital Gains Taxes?
Federal Income Taxes on Capital Gains Under Current Law in 1999
Income
(in thousands)		 % of
Taxpayers		 Average
Income		 CG Tax/ Total
Income Tax		 Average Tax on
Capital Gains		 % of All
Cap Gains Taxes		 Average Income Tax % of Total
Income Tax
<$10 12.2% $ 6,600 — $ — — $ –267 –0.5%
$10-20 20.0% 14,900 nm 2 0.1% –104 –0.3%
$20-30 16.7% 25,000 0.8% 8 0.2% 984 2.7%
$30-40 11.5% 34,500 0.9% 20 0.4% 2,225 4.2%
$40-50 9.2% 44,800 1.3% 52 0.9% 3,921 5.9%
$50-75 14.6% 61,300 2.0% 126 3.4% 6,387 15.2%
$75-100 7.1% 85,800 2.6% 288 3.8% 10,901 12.6%
$100-200 6.0% 132,500 6.1% 1,248 13.9% 20,410 20.2%
$200+ 2.0% 525,400 17.1% 20,675 77.3% 120,939 40.1%
ALL 100.0% $ 49,600 8.9% $ 541 100.0% $ 6,108 100.0%
ADDENDA:
<$50 69.6% $ 23,000 1.2% $ 12 1.6% $ 1,045 11.9%
$50-100 21.7% 69,300 2.3% 179 7.2% 7,863 27.9%
Notes: Lowest income group excludes returns with negative incomes. “nm” = not meaningful, because average current personal income tax, after credits, is less than zero.
Source: Institute on Taxation & Economic Policy Microsimulation Tax Model.
Citizens for Tax Justice, June 26, 1998.

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