From 1965 to 2022, the share of outstanding U.S. stock held in taxable brokerage and mutual fund accounts declined from 79 percent to 27 percent, as reflected in data from the financial accounts of the U.S. government collected by the Federal Reserve. The share of publicly traded stock held in taxable accounts similarly declined from 81 percent to 28 percent (see Table 7). Foreign investors, retirement accounts, and other tax-exempt entities now dominate U.S. stock ownership. 

First publicly reported in 2016, the pronounced shift from taxable to tax-exempt shareholders complicates tax policy. Policymakers who seek to increase shareholder taxes, for instance, must grapple with a relatively small group of taxable accounts. Policymakers pursuing corporate tax cuts could send a large share of the benefit to foreign investors, at least in the short run. And policymakers seeking to stem corporate stock buybacks must address the tax advantages of buybacks over dividends to foreign shareholders — and to a lesser extent to domestic shareholders.

This study updates and confirms the earlierreported shift in stock ownership from taxable to tax-exempt accounts. It examines both the total holdings of U.S. equity (which includes foreign direct investment (FDI) (10 percent or greater holdings in a U.S. company) and publicly traded stock holdings only, which do not include FDI. It details more fully in the Appendix the method used to document the shift.

Policymakers have begun to address the challenges to corporate tax policies presented by the shift in stock ownership from taxable to foreign and other tax-exempt investors. In particular, they have begun to reflect this important change into discussions on the longdebated issues of corporate tax integration, corporate tax incidence, and the taxation of stock buybacks and dividends. This study also describes those efforts.