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More on California Fiscal Policy: Capital Gains Tax Activity Falls for High-Income Taxpayers
More on California Fiscal Policy: Capital Gains Tax Activity Falls for High-Income Taxpayers
Published July 10, 2014
On April 25, the Franchise Tax Board published a summary of selected data on the 2013 tax returns. It reported data for those taxpayers filing electronically and gave us our first -- if preliminary -- peek at the 2013 returns. Given the recent, heightened interest in the tax impact of capital gains, these data may help fiscal analysts assess likely revenues from taxable capital appreciation for 2014-15.
These data show a steep rise in net capital gains activity. Between 2012 and 2013, the number of electronic tax returns reporting capital gains increased from 2.0 million to 2.2 million taxpayers (12 percent), while the reported value of the net gains increased even faster -- from $16.6 billion to $18.8 billion (14 percent).
The increases were not even across income classes. The FTB data disaggregate the returns by broad income category. They show that lower income taxpayers had the highest increases in capital gains. For example, taxpayers with adjusted gross income (AGI) between $50,000 and $100,000 reported that their average net capital gain increased from $1,495 per return to $2,793 (87 percent) during the 2013 tax year. The average taxpayer with AGI between $100,000 and $200,000 reported an increase in capital gains from $4,363 to $6,565 (51 percent). At the higher end, taxpayers with AGI above $500,000 showed a 31 percent average reduction in net capital gains.
Though these preliminary results suggest that capital gains activity shifted from high-income taxpayers during the last tax year, it is too early to mine these data for the cause of the change. For example, did lower-income taxpayers exhaust their accumulated capital losses at a different pace than higher-income taxpayers? Were their capital gains activities associated with home sales in a way that high-end income taxpayers did not experience? FTB will publish more complete summary statistics later in the year.