Retrospective Capital Gains Taxation
AbstractThis paper presents a new approach to the taxation of capital gains that eliminates the deferral advantage present under current realization-based systems, along with the lock-in effect and tax arbitrage possibilities associated with this deferral advantage. The new approach also taxes capital gains only upon realization but, by effectively charging interest on past gains when realization finally occurs, eliminates the incentive to defer such realization. Unlike a similar scheme suggested previously by Vickrey, the present one does not require knowledge of the potentially unobservable pattern of gains over time. It thus is applicable to a very broad range of capital assets.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2792.
Date of creation: Dec 1988
Date of revision:
Publication status: published as The American Economic Review, Vol. 81, No. 1, pp. 167-178, (March 1991).
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