U.S. Individual Capital Gains Tax Rates High
A new report by Ernst & Young LLP, commissioned by the American Council for Capital Formation, compares individual long-term capital gains taxes among 25 major economies of the world as well as major trading partners of the U.S. The U.S. capital gains tax rate compares unfavorably with that of many other major economies (see Figure 1). More than half of the countries surveyed have individual capital gains tax rates lower than that of the U.S.
A low capital gains tax rate has an important role to play in fostering economic growth. Since the historic reduction in capital gains taxes initiated in 1978 by the late Congressman Bill Steiger, lowering taxes on capital gains has been a crucial element in promoting the entrepreneurial drive on which the U.S. economy thrives. Entrepreneurs are a major force for technological breakthroughs, new start-up companies, and the creation of high paying jobs. Many today believe that the ’78 cut in capital gains tax rates not only helped make Silicon Valley the center of technological breakthroughs but has also had a strong, positive, and lasting impact on overall investment, economic growth and job creation in the U.S. The 2003 capital gains tax cuts have also been a boon to the U.S. economy. Extension of the 15% rate is crucial to maintaining the U.S. competitive edge against its major trading partners. (For more details on international capital gains tax rates, please refer to Table 1.)