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Policy Watch: Cutting Capital Gains Taxes

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  • Gerald E. Auten
  • Joseph J. Cordes

Abstract

From 1922 to 1986, long-term capital gains were taxed at lower rates than other income, generally by allowing a portion of long-term capital gains to be excluded from taxable income. While taxing capital gains at the same rates as other income has been hailed by some as a major accomplishment of tax reform, it has been criticized by others as one of its main flaws. As a result, there have been proposals each year since 1986 to restore some type of capital gains preference. These proposals have sparked a lively debate centered on three main questions: Would reducing the capital gains tax lower or raise federal revenues? Who benefits most from cutting the capital gains tax? Would lower tax rates on capital gains improve economic performance?

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.5.1.181
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 5 (1991)
Issue (Month): 1 (Winter)
Pages: 181-192

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Handle: RePEc:aea:jecper:v:5:y:1991:i:1:p:181-92

Note: DOI: 10.1257/jep.5.1.181
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References

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  1. Joseph E. Stiglitz, 1983. "Some Aspects of the Taxation of Capital Gains," NBER Working Papers 1094, National Bureau of Economic Research, Inc.
  2. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-78, Winter.
  3. 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.
  4. Pechman, Joseph A, 1987. "Tax Reform: Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 11-28, Summer.
  5. Auten, Gerald E. & Burman, Leonard E. & Randolph, William C., 1989. "Estimation and Interpretation of Capital Gains Realization Behavior: Evidence from Panel Data," National Tax Journal, National Tax Association, vol. 42(3), pages 353-74, September.
  6. Poterba, James M., 1989. "Capital Gains Tax Policy Toward Entrepreneurship," National Tax Journal, National Tax Association, vol. 42(3), pages 375-89, September.
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Cited by:
  1. Harold M. Somers, 1991. "Leverage: The Tax Incentives," UCLA Economics Working Papers 625, UCLA Department of Economics.
  2. James B. Davies, 1995. "Distributional Effects of the Lifetime Capital Gains Exemption: Single vs. Multi-Year Analysis," Canadian Public Policy, University of Toronto Press, vol. 21(s1), pages 159-173, November.
  3. Sijbren Cnossen & Lans Bovenberg, 2001. "Fundamental Tax Reform in The Netherlands," International Tax and Public Finance, Springer, vol. 8(4), pages 471-484, August.
  4. Magnus Henrekson & Dan Johansson & Mikael Stenkula, 2010. "Taxation, Labor Market Policy and High-Impact Entrepreneurship," Journal of Industry, Competition and Trade, Springer, vol. 10(3), pages 275-296, September.
  5. Cnossen,Sijbren & Bovenberg,Lans, 2000. "Fundamental Tax Reform In The Netherlands," Research Memorandum 003, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  6. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 141-157, Winter.
  7. Tim Dowd & Robert McClelland & Athiphat Muthitacharoen, 2012. "New Evidence on the Tax Elasticity of Capital Gains: Working Paper 2012-09," Working Papers 43334, Congressional Budget Office.
  8. Holtz-Eakin, Douglas, 1995. "Should Small Businesses Be Tax Favored?," National Tax Journal, National Tax Association, vol. 48(3), pages 387-95, September.
  9. Dowd, Tim & McClelland, Robert & Muthitacharoen, Athiphat, 2012. "Heterogeneity In The Tax Responses Of Personal Capital Gains Realizations," National Tax Journal, National Tax Association, vol. 65(4), pages 827-40, December.
  10. Douglas Holtz-Eakin, 1995. "Public Policy and Entrepreneurship," Center for Policy Research Policy Briefs 5, Center for Policy Research, Maxwell School, Syracuse University.

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