Doesn't the second para. beneath contradict itself? Don't the boldened words contradict each other?
So let’s pick up where we left off a few chapters ago. Recall that the net annual return was 7.8 percent for the average equity fund over the past 25 years and 9.0 percent for the S&P 500 index fund. With the high portfolio turnover of actively managed funds, their taxable investors were subject to an estimated effective annual federal tax of 1.2 percentage points per year, or about 15 percent of their total pre-tax return. (State and local taxes would further balloon the figure.) Result: their after-tax annual return was cut to 6.6 percent.
Despite the higher returns that they earned, investors in the index fund were actually subjected to lower taxes, largely derived from their dividend income. The extremely low costs of index funds consume less dividend income relative to actively managed funds, resulting in higher dividend yields and, therefore, higher taxes on dividends.
John Bogle's The Little Book of Common Sense Investing, 10th Anniversary Edn. Pages 87, 88.