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1 Scott A. Hodge, Majority of Seniors Benefit from Reduced Capital Gains and Dividend Tax Rates 1 (2005)

handle is hein.taxfoundation/ffecxz0001 and id is 1 raw text is: FOUNDATION December 6, 2005 Majority of Seniors Benefit from Reduced Capital Gains and Dividend Tax Rates by Scott A. Hodge Most of the debate over whether or not to extend the current 15 percent tax rate on capital gains and dividends-both of which are set to expire in 2008-has focused on the relatively high incomes of a minority of taxpayers who benefit from these reduced rates. Comparatively little attention has been paid to a more complete demographic profile of all of the taxpayers who claim capital gains or dividend income. Upper-income Americans clearly earn the bulk of dividend and capital gains income. But as stock ownership becomes more universal in America, stock owners-those claiming dividends or capital gains income-are becoming increasingly middle-class. Based on IRS data, Tax Foundation economists estimate that more than 80 percent of taxpayers who claim dividend income earn less than $100,000 and 76.4 percent of those who claim capital gains earn less than $100,000. Capital Gains, Dividends and the Graying of America In order to develop a demographic profile of taxpayers who benefit from lower tax rates on capital gains and dividends, Tax Foundation economists employed the Foundation's Individual Tax Model and Matched IRS/Census Database. The picture that emerges is largely a reflection of the graying of America: a sizeable percentage of taxpayers who claim dividends or capital gains are over age 55, and the majority of taxpayers over age 55 claim some form of capital gains or dividend income. Table 1 illustrates the percentage of capital gains and dividend income claimed by age group. Among taxpayers with dividend income, roughly 23 percent are over age 65 while nearly 36 percent are over age 55. Among taxpayers with capital gains income, nearly 26 percent are over age 65 and more than 38 percent are over age 55.

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