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Tax Evasion and Capital Gains Taxation

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  • James M. Poterba

Abstract

This paper uses time-series data to investigate how changes in capital gains tax rates affect taxpayer compliance. It finds that a one percent increase in the marginal tax rate reduces voluntary compliance by between one half and one percent. These results confirm the findings of previous studies based on individual household data. They also suggest that at least one quarter of the observed capital gain realization response to changes in marginal tax rates is due to changes in reporting behavior, rather than portfolio behavior.

Suggested Citation

  • James M. Poterba, 1987. "Tax Evasion and Capital Gains Taxation," NBER Working Papers 2119, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2119
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    1. Martin Feldstein & Joel Slemrod & Shlomo Yitzhaki, 1980. "The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 777-791.
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