On the Design and Reform of Capital-Gains Taxation
AbstractAfter reviewing recent work on the feasibility of taxing capital gains on accrual or in an equivalent manner. This paper develops and presents simulations of a model of household behavior. aimed at assessing the efficiency effects of this and other tax reforms, The model accounts for the portfolio choice and intertemporal consumption distortions that capital gains taxes induce under current law. Among the simulation results are; 1. Eliminating the "lock-in" effect through a revenue-neutral move to accrual taxation causes national saving to decline, as households face a lower tax on present consumption from appreciated assets and. by reallocating existing wealth more efficiently, need to save less for future contingencies. Despite reducing saving, however. such a reform increases economic efficiency. 2. A simple reduction in the rate of capital gains taxation reduces national saving even for very high intertemporal elasticities of substitution, because of the additional income effect associated with reduced taxes on previously accumulated gains and the more efficient reallocation of existing wealth. However, making the tax cut prospective. although increasing saving. delays portfolio rebalancing and need not improve efficiency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 82 (1992)
Issue (Month): 2 (May)
Other versions of this item:
- Alan J. Auerbach, 1992. "On the Design and Reform of Capital Gains Taxation," NBER Working Papers 3967, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James M. Poterba & Lawrence H. Summers, 1984.
"The Persistence of Volatility and Stock Market Fluctuations,"
353, Massachusetts Institute of Technology (MIT), Department of Economics.
- Poterba, James M & Summers, Lawrence H, 1986. "The Persistence of Volatility and Stock Market Fluctuations," American Economic Review, American Economic Association, vol. 76(5), pages 1142-51, December.
- James M. Poterba & Lawrence H. Summers, 1987. "The Persistence of Volatility and Stock Market Fluctuations," NBER Working Papers 1462, National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 1988. "Capital Gains Taxation in the United States: Realizations, Revenue, and Rhetoric," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 595-638.
- William Vickrey, 1939. "Averaging of Income for Income-Tax Purposes," Journal of Political Economy, University of Chicago Press, vol. 47, pages 379.
- Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-86, April.
- Daniel J. Kovenock & Michael Rothschild, 1985. "Notes on the Effect of Capital Gains Taxation on Non-Austrian Assets," NBER Working Papers 1568, National Bureau of Economic Research, Inc.
- Eduardo Engel & Alexander Galetovic, 1998. "¿Qué hacer con los impuestos que pagan las ganancias de capital en Chile?," Documentos de Trabajo 46, Centro de Economía Aplicada, Universidad de Chile.
- Michael Haliassos & Andrew B. Lyon, 1993. "Progressivity of Capital Gains Taxation with Optimal Portfolio Selection," NBER Working Papers 4253, National Bureau of Economic Research, Inc.
- Fischer, Carolyn & Toman, Michael & Kerr, Suzi, 1998.
"Using Emissions Trading to Regulate U.S. Greenhouse Gas Emissions: An Overview of Policy Design and Implementation Issues,"
dp-98-40, Resources For the Future.
- Fischer, Carolyn & Kerr, Suzi & Toman, Michael, 1998. "Using Emissions Trading to Regulate U.S. Greenhouse Gas Emissions: An Overview of Policy Design and Implementation Issues," National Tax Journal, National Tax Association, vol. 51(n. 3), pages 453-64, September.
- Dirk Schindler & Bodo Hilgers, 2002. "Shall We Tax the Risk Premium?," CoFE Discussion Paper 02-17, Center of Finance and Econometrics, University of Konstanz.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.