Interest Equalization Tax


DEFINITION of 'Interest Equalization Tax'

A federal levy on the purchase price on foreign stocks and bonds bought by Americans. The interest equalization tax (IET) was established in 1963 and eliminated in 1974. It was designed to decrease the U.S. balance of payments deficit by discouraging investment in foreign securities and encouraging investment in domestic securities.

BREAKING DOWN 'Interest Equalization Tax'

The IET rate was 15% on stocks and ranged from 1.05% to 22.5% on bonds depending on their maturity. The shortest maturity bonds had the lowest tax rate and the longest maturity bonds had the highest tax rate. The tax was one result of the increasing impact of international economic activities on the United States. An unintended consequence of the IET was to increase activity in the Eurodollar market.

  1. Interest

    The charge for the privilege of borrowing money, typically expressed ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  6. Progressive Tax

    A tax that takes a larger percentage from the income of high-income ...
Related Articles
  1. Taxes

    Reporting Your Interest Income

    Find out how your accounts are taxed and which forms you need.
  2. Options & Futures

    How Interest Rates Affect The U.S. Markets

    Interest rates can have both positive and negative effects on U.S. stocks, bonds and inflation.
  3. Investing Basics

    How To Prepare For Rising Interest Rates

    Get to know the basic, time-tested strategies that any investor or trader can use to profit in a rising interest rate environment.
  4. Investing Basics

    Why Interest Rates Affect Everyone

    Learn why interest rates are one of the most important economic variables and how every individual and business is affected by rate changes.
  5. Insurance

    Medicare 101: Do You Need All 4 Parts?

    Medicare is the United States’ health insurance program for those over age 65. Medicare has four parts, but you might not need them all.
  6. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  7. Taxes

    Revisiting the Internet Sales Tax Bill: 2013 Vs. 2015

    Learn about the Marketplace Fairness Act of 2015 being reviewed by congress and the differences between it and the 2013 Marketplace Fairness Act.
  8. Economics

    Understanding Donald Trump's Stance on China

    Find out why China bothers Donald Trump so much, and why the 2016 Republican presidential candidate argues for a return to protectionist trade policies.
  9. Economics

    Will Putin Ever Leave Office?

    Find out when, or if, Russian President Vladimir Putin will ever relinquish control over the Russian government, and whether it matters.
  10. Investing Basics

    Internet Sales Tax's Effect on Interstate Commerce

    Find out how a national Internet sales tax could affect interstate commerce, and why some bigger online retailers are lobbying for such a tax.
  1. Who determines interest rates?

    In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of ... Read Full Answer >>
  2. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  3. Does a Flexible Spending Account (FSA) cover braces?

    Funds from a Flexible Spending Account (FSA) can be used to cover costs associated with installing, maintaining and removing ... Read Full Answer >>
  4. Does QVC charge sales tax?

    QVC, an American TV network, is registered with states to collect sales or use tax on taxable items. QVC is also required ... Read Full Answer >>
  5. Does a Flexible Spending Account (FSA) cover glasses?

    The funds in a Flexible Spending Account (FSA) can be used to cover most common medical expenses; this includes the cost ... Read Full Answer >>
  6. Are tax brackets adjusted for inflation?

    Each year, the U.S. Internal Revenue Service (IRS) adjusts tax brackets for changes in the cost of living to calculate federal ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Flier

    The slang term for a decision to invest in highly speculative investments.
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center