Estimates of Marginal Tax Rates for Dividends and Bond Interest in the United Kingdom 1919-1970

This study estimates the effective marginal rates of taxation levied during the period 1919-1970 on receipts by United Kingdom investors from (a) dividends and (b) interest on bonds (quoted fixed interest securities). The estimates make allowance for the diverse marginal rates of income tax and surtax (supertax) payable by different categories of recipients, namely the various personal income groups and certain types of institution. The procedure is to distribute a marginal ?1 of dividend/interest in each year among the relevant categories according to their estimated proportions of the total holding of all shares/bonds and (after tracing distributions to institutions notionally to the ultimate personal recipients) to calculate a weighted average of marginal rates. Such an average estimates the tax effectively borne by a security with a representative pattern of ownership. No individual security is likely to be distributed according to such a pattern, but it is hoped that the averages provide reasonable overall values of marginal taxation for use in aggregative studies of savings, portfolio selection and the cost of capital. The results also have some bearing on the management of public revenue and on policies affecting the distribution of wealth and income. It should be borne in mind that the rates of taxation considered in this paper do not apply to capital gains, nor do they include corporate income taxes. In addition to the overall weighted averages, marginal rates are given for particular sectors, including a weighted average for the personal sector as a whole. The main results are set out in Table 1, which shows overall weighted averages of marginal tax rates for dividends and bond interest in each year as well as the standard rate of income tax. Section I of the paper discusses the classification of holders of shares and bonds according to their tax characteristics. Section II describes the methods of calculating marginal tax rates for the various categories. Section III gives

Allowance (engineering) · Bond · Dividend · Econometrics · Economics · Gross income · Interest rate · Marginal cost of capital schedule · Monetary economics · Net interest income · Public economics · State income tax · Tax rate · Tax reform · Finance · Financial Literacy, Pension, Retirement Analysis · Fiscal Policy and Economic Growth · Housing Market and Economics

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