Capital gains tax refers to the levy imposed on profits earned from the sale of capital assets, such as stocks, bonds, or real estate. When an asset is sold for a higher price than its purchase price, the difference is subject to taxation in most jurisdictions.
Capital gains taxes are important sources of revenue for governments. They promote fairness by ensuring that those who profit from the appreciation of assets contribute to the public treasury. The tax also discourages excessive speculation and market volatility by taxing short-term gains at higher rates than long-term gains. Historically, the United States introduced a capital gains tax in 1913 as part of its first modern income tax law.