[robotresearcher]

The dividend is taxable ordinary income. The increased share value is not taxable until sold, and then it’s capital gains; usually a much lower rate.

[tacticalturtle]

In most cases dividends are taxed at the capital gains rate.

https://en.wikipedia.org/wiki/Qualified_dividend

[robotresearcher]

Good correction, thanks. For completeness, that’s dividends on stocks, but not dividends on bonds, which are treated like interest.

In any case, dividends are taxable in the current year, and unrealized stock gains are not.

In case the difference doesn’t seem like a big deal, consider that if you die without selling the stocks, your heirs inherit them at the prevailing price, and no one ever pays tax on the gain they made between when you bought them and when you died.

Rich people who need neither dividend cash or stock sales to pay living expenses prefer not to get dividends so they can pay very little tax.

This enormous loophole for the rich brought to you by your US representatives.