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Measuring Permanent Responses to Capital-Gains Tax Changes in Panel Data

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  • Burman, Leonard E
  • Randolph, William C
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    Abstract

    The authors use panel data and information about differences in state tax rates to separate the effects of transitory and permanent tax rate changes on capital-gains realizations behavior. The estimated effect of permanent change is substantially smaller than the effect of transitory change. The difference is even larger than differences between estimates from past micro data studies, which have primarily measured the transitory effect, and time-series studies, which have primarily measured the permanent effect. The authors' results resolve a long-standing conflict between micro data and time-series studies of how marginal tax rates affect capital-gains realizations behavior. Copyright 1994 by American Economic Association.

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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 84 (1994)
    Issue (Month): 4 (September)
    Pages: 794-809
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    Handle: RePEc:aea:aecrev:v:84:y:1994:i:4:p:794-809

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    1. Lee, Lung-fei & Maddala, G S & Trost, R P, 1980. "Asymptotic Covariance Matrices of Two-Stage Probit and Two-Stage Tobit Methods for Simultaneous Equations Models with Selectivity," Econometrica, Econometric Society, vol. 48(2), pages 491-503, March.
    2. Martin Feldstein & Joel Slemrod & Shlomo Yitzhaki, 1981. "The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains," NBER Working Papers 0250, National Bureau of Economic Research, Inc.
    3. George M. Constantinides, 1984. "Optimal Stock Trading with Personal Taxes: Implications for Prices and the Abnormal January Returns," NBER Working Papers 1176, National Bureau of Economic Research, Inc.
    4. Auten, Gerald E & Clotfelter, Charles T, 1982. "Permanent versus Transitory Tax Effects and the Realization of Capital Gains," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 613-32, November.
    5. Stiglitz, Joseph E., 1983. "Some aspects of the taxation of capital gains," Journal of Public Economics, Elsevier, vol. 21(2), pages 257-294, July.
    6. Joel Slemrod & William Shobe, 1990. "The Tax Elasticity of Capital Gains Realizations: Evidence from a Panel of Taxpayers," NBER Working Papers 3237, National Bureau of Economic Research, Inc.
    7. Bogart, William T & Gentry, William M, 1995. "Capital Gains Taxes and Realizations: Evidence from Interstate Comparisons," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 267-82, May.
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    Cited by:
    1. Auten, Gerald & Joulfaian, David, 2001. "Bequest taxes and capital gains realizations," Journal of Public Economics, Elsevier, vol. 81(2), pages 213-229, August.
    2. David Joulfaian & Mark Rider, 2003. "Errors in Variables and Estimated Price Elasticities for Charitable Giving," International Center for Public Policy (formerly the International Studies Program) Working Paper Series, at AYSPS, GSU paper0307, International Center for Public Policy (formerly the International Studies Program), Andrew Young School of Policy Studies, Georgia State University.
    3. Alan J. Auerbach & Jonathan M. Siegel, 2000. "Capital Gains Realizations of the Rich and Sophisticated," NBER Working Papers 7532, National Bureau of Economic Research, Inc.
    4. V. V. Chari & Mikhail Golosov & Aleh Tsyvinski, 2003. "Business Start-ups, the Lock-in Effect, and Capital Gains Taxation," Levine's Working Paper Archive 506439000000000222, David K. Levine.
    5. Austan Goolsbee, 2000. "Taxes, High-Income Executives, and the Perils of Revenue Estimation in the New Economy," NBER Working Papers 7626, National Bureau of Economic Research, Inc.
    6. Melvin Stephens Jr. & Jennifer Ward-Batts, 2001. "The Impact of Separate Taxation on the Intra-Household Allocation of Assets: Evidence from the UK," NBER Working Papers 8380, National Bureau of Economic Research, Inc.
    7. 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," Discussion Papers dp-98-40, Resources For the Future.
    8. Martin Feldstein, 1995. "Behavioral Responses to Tax Rates: Evidence from TRA86," NBER Working Papers 5000, National Bureau of Economic Research, Inc.
    9. Ferhan Salman, 2005. "Information, Capital Gains Taxes & New York Stock Exchange," Working Papers 0513, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    10. Jon Bakija & Bradley T. Heim, 2011. "How Does Charitable Giving Respond to Incentives and Income? New Estimates from Panel Data," NBER Chapters, in: Economic Analysis of Tax Expenditures National Bureau of Economic Research, Inc.
    11. Mihir A. Desai & William M. Gentry, 2004. "The Character and Determinants of Corporate Capital Gains," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 1-36 National Bureau of Economic Research, Inc.
    12. Jon Bakija & Bradley Heim, 2008. "How Does Charitable Giving Respond to Incentives and Income? Dynamic Panel Estimates Accounting for Predictable Changes in Taxation," NBER Working Papers 14237, National Bureau of Economic Research, Inc.

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