Do High Taxes Lock-in Capital Gains? Evidence from a Flat Rate Tax System
AbstractThe purpose of this paper is to study, using a comprehensive Swedish panel data set, whether investors are less willing to realize capital gains when the marginal tax rate on capital gains is relatively high. In Sweden capital gains are taxed independently of ordinary income at a flat rate, making it possible to avoid endogenity problems and to include direct measures of capital gains taxation in the empirical analysis. The results indicate that a 10% increase in capital gains tax rate reduces the number of realizations of capital gains with 8.7% and the realized amount, given the decision to realize, with 1.9%. In addition, wealthy individuals seem to respond more to changes in capital gains tax rates than less-wealthy individuals.
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Bibliographic InfoPaper provided by HUI Research in its series HUI Working Papers with number 6.
Length: 25 pages
Date of creation: 31 Jan 2007
Date of revision:
Publication status: Published as Daunfeldt, Sven-Olov, Ulrika Praski-Ståhlgren and Niklas Rudholm, 'Do High Taxes Lock-in Capital Gains? Evidence from a Flat Rate Tax System' in Public Choice, 145, 25-38, 2010., 2010, pages 14.
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Capital gains realizations; tax avoidance; panel data;
Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-03-03 (Accounting & Auditing)
- NEP-ALL-2007-03-03 (All new papers)
- NEP-EEC-2007-03-03 (European Economics)
- NEP-PBE-2007-03-03 (Public Economics)
- NEP-PUB-2007-03-03 (Public Finance)
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- Pietola, Kyosti & Myyra, Sami & Pouta, Eija, 2009.
"Fiscal and trade distorting effects of capital gains tax on land sales - empirical evidence from agricultural land market in Finland,"
2009 Conference, August 16-22, 2009, Beijing, China
50953, International Association of Agricultural Economists.
- Pietola, Kyosti & Myyra, Sami & Pouta, Eija, 2009. "Fiscal and trade distorting effects of capital gains tax on land sales - empirical evidence from agricultural land market in Finland," Discussion Papers 50040, MTT Agrifood Research Finland.
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