Capital Gains Tax Reform Benefits Seniors, Pennsylvanians

The Tax Foundation released an analysis of federal capital gains and dividend taxes: The Tax Foundation – Majority of Seniors Benefit from Reduced Capital Gains and Dividend Tax Rates. As Washington debates whether to continue the current 15% rate on investment income, it is important to note who is most effected. Seniors are far more likely to have capital gains and dividend earnings – often a crucial part of their retirement income. Nearly one-third of seniors reported capital gains and over 50% reported dividend earnings in 2004.

Additionally, IRS data indicates that almost one-third of Pennsylvanians reported capital gains and dividend income in 2000. The average savings from the lower capital gains tax was $544 per person in 2003.

The Wall Street Journal notes that the reduction in investment taxes has been crucial to economic growth – business investment is up, the stock market and GDP are on the rise, and “tax receipts rose by more than in any previous year in U.S. history, even adjusting for inflation.” Additionally the lower rates have led to an increased number of individual investors and more companies are paying dividends to their stockholders.

As the percentage of families and individuals looking to invest continues to rise and as the “Baby Boom” generation begins to reach retirement age, taxes on investment income will become increasingly debilitating. Keeping the capital gains rate at 15% produces tax savings for a majority of seniors and almost 2 million Pennsylvanians, and is crucial for economic growth.