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Tax Regimes and Capital Gains Realizations

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  • Jacob, Martin

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    (Uppsala Center for Fiscal Studies)

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    Abstract

    This paper analyzes the effects of progressive versus proportional taxation on capital gains realization behavior. Using a comprehensive panel of over 230,000 individuals in Sweden for 1973-1996, this paper shows after progressive capital gains taxes were cut from over 80% in the 1980s to a proportional tax rate of 30% in 1991, especially high-income taxpayers increased capital gains realizations. The reaction to the introduction of the proportional capital gains tax rate is more pronounced among younger individuals. This paper also shows that under a progressive (proportional) tax regime, investors with excess income are less (more) likely to realize capital gains than individuals with liquidity constraints. Hence, proportional versus progressive taxation plays an important role in capital gains realizations of private investors.

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    Bibliographic Info

    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2011:9.

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    Length: 42 pages
    Date of creation: 09 Aug 2011
    Date of revision:
    Handle: RePEc:hhs:uufswp:2011_009

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    Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
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    Web page: http://www.nek.uu.se/
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    Related research

    Keywords: Capital Gains Tax; Proportional Tax; Progressive Tax; Top Incomes; Life-Cycle;

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