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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and local
levels. We are a 501(c)(3) nonprofit
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Taxation of Capital Gains
• Several politicians have suggested eliminating deferral of capital gains
(appreciation in an asset’s price over original purchase price) via a mark-to-
market system as one way to generate revenue in a progressive manner and
• A mark-to-market system would tax accrued gains on assets annually and
eliminate the deferral advantage of the current capital gains tax system.
• A mark-to-market system would increase revenue, especially in the short
term, as the government would be able to access a previously untaxed base.
A mark-to-market tax regime would also provide a more accurate measure of
fluctuations in wealth due to capital gains and losses year over year.
• Taxing capital gains annually would improve economic efficiency by removing
the lock-in effect that currently reduces government revenue and deters
investors from reinvesting capital gains earnings.
• A mark-to-market system would increase the tax code’s burden on saving and
reduce the incentive to save, potentially resulting in lower levels of saving and
national income (GNI).
Federal Research Manager
TAX FOUNDATION | 2
Wealth and income inequality are rising concerns among policymakers and presidential candidates,
prompting discussions about whether the tax code should be more progressive to combat inequality.1
Policymakers have introduced a variety of proposals to ta