Washington, D.C., has the highest rate of stock market participation in the U.S., with 29% of tax returns from there reporting dividend or capital gains income in 2022, the year for which the most recent Internal Revenue Service (IRS) data is available, according to a Motley Fool analysis of that data. The District of Columbia’s stock market participation rate is more than double that of Mississippi, which has the lowest in the country at 11%.

Stock market participation by state is calculated by measuring the share of tax returns reporting dividend or capital gains income in a given year. Retirement account income is not included. This methodology was first used by researchers at the Federal Reserve Bank of St. Louis in 2017. It is a conservative estimate of actual state-level stock market participation, not a full count of investors. A separate Gallup survey puts overall U.S. stock ownership at 58%, more than double what this measure shows, because most of that 58% invest through a retirement account.

For individual investors, the long-standing gap in stock market participation between states highlights unequal exposure to decades of stock market gains and provides further insight into the distribution of stock ownership and its implications for wealth distribution.

Nationally, 21% of tax returns reported dividend income and 19% reported capital gains in 2022. Washington, D.C. led with reported dividend income at 29% and capital gains at 25%, while Mississippi came in at the bottom at 11% and 10%, respectively

In addition to the District of Columbia, these states led in reporting dividend income: Connecticut (27%), Massachusetts (27%), New Jersey (26%), and New Hampshire (26%).

The states with the lowest percentage of their population reporting dividend income were Mississippi (11%), West Virginia (14%), Alabama (14%), Oklahoma (14%), and New Mexico (15%).

The states with the highest percentage of residents reporting capital gains income, after Washington, D.C., were Washington (24%), Massachusetts (23%), Connecticut (23%), New Jersey (23%), and Colorado (23%).

The states with the lowest share of residents reporting capital gains income were Mississippi (11%), West Virginia (12%), Alabama (13%), Louisiana (14%), and New Mexico (14%).

Median household income is a driver of differences in the rates at which states report stock market participation — higher income states have a higher share of residents reporting than lower income states. D.C.’s median household income is nearly double Mississippi’s, but its median age is five years lower.

Washington, D.C.’s stock market participation also grew faster than any state from 2013 to 2022, by 7%. Washington state’s grew by 4%, California by 3%, and Colorado by 3% as well. Overall, 48 out of 51 jurisdictions saw their stock market participation grow. Connecticut, Alaska, and West Virginia shrank by less than a percentage point.