What does a passive U.S. equity investor keep after paying federal taxes? In the May 2026 version of his paper entitled "Uncle Sam's Cut: A Century of the Federal Tax Drag on US Equity Returns", Andrew Ang estimates the Federal tax drag on passive U.S. equity investors by simulating a taxable investor holding the capitalization-weighted U.S. market portfolio under the year-by-year federal tax code with tax-lot accounting, holding period rules, capital loss limits and loss carry-forward allowances. His baseline taxpayer is a 30-year-old male filing jointly who has $1,000,000 of taxable capital and $750,000 in annual wages in 2025 dollars (taxable equity income concentrates near the top of the income distribution). Each month, positions adjust for the the consumer price index (CPI) and appreciate/depreciate with capital gains and dividends, with dividends reinvested into stocks. For comparison, he also looks at a capitalization-weighted top 500 portfolio. Using monthly data for the market portfolio, the 500 largest stocks, tax rates and CPI during 1926 through 2025, he finds that:
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