Number: RS21706
Title: Historical Effective Marginal Tax Rates on Capital Income
Authors: Jane G. Gravelle, Government and Finance Division 
Abstract: Effective marginal tax rates on investment are forward-looking estimates that project over the lifetime of an investment what share of the return will effectively be paid in taxes. These rates can differ significantly from average tax rates measured by dividing tax liability by income, because they are affected by timing. Effective tax rates fell from the early 1950s through the mid-1960s, rose until the early 1980s, and then dropped. They have stayed about the same until relatively recently, when they fell to an all-time low with bonus depreciation, relief of double tax on dividends, and lower marginal tax rates. The end of bonus depreciation and higher inflation rates increased the tax rates in the past two years.
Pages: 6
Date: November 24, 2006