Capital Gains Tax History
About Capital Gains Tax History
The US capital gains tax was established in 1921, setting preferential rates for long term capital gains. The preferential rate was justified as encouraging long term investment. The capital gains tax rate has fluctuated significantly. The Tax Reform Act of 1986 equalized capital gains and ordinary income rates at 28 percent. Subsequent legislation restored preferential rates. As of 2024, long term capital gains are taxed at 0, 15, or 20 percent depending on income. The preferential rate for capital gains versus wages is one of the most significant features of the US tax system. Critics argue it benefits the wealthy, who derive most income from investments. Proponents argue it encourages saving and investment.
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