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• The United States’ average top marginal capital gains tax rate
ranks sixth in the OECD at a rate of 28.7 percent.
• The United States’ tax rate on capital gains is over 10 percentage
points higher than OECD average of 18.2 percent.
• California’s top marginal tax rate of 33 percent is the third-
highest tax rate on capital gains in the industrialized world,
behind only Denmark and France.
• The capital gains tax is a non-neutral tax that creates a bias
against savings, slows economic growth, and harms U.S.
The High Burden of State and Federal
Capital Gains Tax Rates
By Kyle Pomerleau
Savings in an economy is important. It leads to higher levels of investment,
a larger capital stock, increased worker productivity and wages, and faster
economic growth. However, the United States currently places a heavy tax
bias against saving and investment. One way it does this is through a high top
marginal tax rate on capital gains.
Currently, the United States’ top marginal tax rate on long-term capital gains
income is 23.8 percent. In addition, taxpayers face state-level capital gains
tax rates as low as zero and as high as 13.3 percent. As a result, the average
combined top marginal rate in the United States is 28.7 percent. This rate
exceeds the average top capital gains tax rate of 18.2 percent faced by taxpayers
throughout the industrialized world. Even more, taxpayers in some U.S. states
face top rates on capital gains over 30 percent, which is higher than most
industrialized countries. In fact, California’s top marginal capital gains tax rate
of 33 percent is the third highest in the industrialized world.
Capital Gains Taxes in the United States
The current federal top marginal tax rate on long-term1 capital gains in the
United States is 20 percent plus a 3.8 percent tax on unearned income to
fund the Affordable Care Act for a total of 23.8 percent for taxpayers with an
adjusted gross income of $200,000 ($250,000 married fil