Data on Tax Rates of Real Capital Gains (Nominal capital gains adjusted for inflation)

I am publishing a piece on inflation and capital gains taxation this Sunday in my Forbes Econworld blog. It is tentatively titled “Widow Martha Pays More Than Buffet and His Secretary Combined.”  In this piece, I use a Standard and Poor’s  calculator to show nominal and real gains from investments in the S&P 500 over five year intervals from 1971 to 2011 and for the whole period at the current 15 percent capital-gains rate. (I also show the same results with Obama’s proposed 23.8 percent capital gains rate).

I find that, for the entire 40 years, the effective tax rate on real capital gains was 47 percent. In three periods, real gains were negative (for an infinite tax rate). During the three five-year periods of booming markets, the real tax rate was 20 percent. In the period 1986-1990, the real tax rate equaled that of Buffet’s secretary at 30 percent. If we use Obama’s proposed 23 percent capital gains tax rate, the lowest effective tax rate on real gains is 30 percent.

period	Annual percentage S&P 500  nominal gain (loss)	Annual percentage S&P real gain (loss)	Tax rate on real gains with a 15% tax on nominal gains	Tax rate on real gains with a 23% tax on nominal gains
1971-2011	6.53	2.09	46.9	71.9
1971-1976	1.09	-5.7	Infinitely large	infinitely large
1976-1981	3.41	-6.05	Infinitely large	infinitely large
1981-1986	14.96	11.3	19.9	30.4
1986-1991	9.34	4.6	30.4	46.7
1991-1996	13.85	10.71	19.4	29.7
1996-2001	9.03	6.69	20.3	31.0
2001-2006	4.35	1.61	40.5	62.1
2006-2011	-2.57	-4.73	Infinitely large	infinitely large