Washington, D.C. topped the nation in stock market participation in 2022, with 29% of individual tax returns reporting dividend or capital‑gains income, according to a recent analysis by The Motley Fool using the latest IRS data. The District’s rate is more than double that of Mississippi, which recorded the lowest participation at 11%.
How participation is measured
The study counts the share of tax returns that show dividend or net capital‑gains income. It does not include earnings from retirement accounts such as 401(k)s or IRAs, making it a conservative estimate of true investing activity. The methodology was first applied by researchers at the Federal Reserve Bank of St. Louis in 2017 and has been used in subsequent annual reports.
National context
Across the United States, 21% of tax returns reported dividend income and 19% reported capital gains in 2022. A separate Gallup survey estimates that about 58% of Americans own stocks, largely through retirement accounts, which this measure does not capture.
States at the top and bottom
Beyond the District, the states with the highest dividend‑reporting rates were Connecticut (27%), Massachusetts (27%), New Jersey (26%) and New Hampshire (26%). For capital gains, Washington state (24%), Massachusetts (23%), Connecticut (23%), New Jersey (23%) and Colorado (23%) followed D.C.
At the opposite end, Mississippi ranked lowest for both dividends (11%) and capital gains (11%). West Virginia, Alabama, Oklahoma and New Mexico also posted low figures, ranging from 12% to 15%.
Why income matters
Median household income explains roughly 61% of the variation in participation rates among states. D.C.’s median household income is nearly twice that of Mississippi, and its residents are, on average, five years younger. Higher‑income states tend to have more residents reporting investment income, while lower‑income states lag behind.
Growth trends
From 2013 to 2022, D.C.’s participation grew the fastest of any jurisdiction, rising 7 percentage points. Washington state added 4 points, while California and Colorado each grew 3 points. Overall, 48 of the 51 jurisdictions examined saw increases, with only Connecticut, Alaska and West Virginia experiencing slight declines.
What the numbers don’t capture
The metric excludes retirement‑account earnings, so many residents in low‑participation states likely own stocks through 401(k)s or IRAs. It also does not differentiate between capital gains from stock sales and gains from real estate or business sales, which can inflate the figure in states with active property markets.
Implications for families
The gap underscores how wealth accumulation through the stock market remains uneven across the country. For families seeking to close the divide, financial experts suggest starting with low‑cost index funds or contributing consistently to retirement accounts—strategies that have helped countless households build wealth over time.
Looking ahead
Understanding these participation disparities can inform policymakers and community leaders as they consider ways to improve financial literacy, expand access to employer‑sponsored retirement plans, and encourage prudent investing habits among all Americans.
Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.
