Capital Gains Realizations of the Rich and Sophisticated
AbstractThis paper attempts to bring theoretical and empirical research on capital gains realization behavior closer together by considering whether investors who appear to engage more in strategic tax avoidance activity also respond differently to tax rates. We find that such investors exhibit significantly smaller responses to permanent tax rate changes than other investors. Put another way, a larger part of their response to capital gains tax rates reflects timing, consistent with their closer adherence to tax avoidance strategies emphasizing arbitrage based on tax rate differentials. This finding holds for two alternative specifications of realization behavior, one of which suggests larger permanent responses to capital gains tax rates than those of previous panel studies.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7532.
Date of creation: Feb 2000
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Other versions of this item:
- Jonathan M. Siegel & Alan J. Auerbach, 2000. "Capital-Gains Realizations of the Rich and Sophisticated," American Economic Review, American Economic Association, vol. 90(2), pages 276-282, May.
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-14 (All new papers)
- NEP-PBE-2000-02-14 (Public Economics)
- NEP-PUB-2000-02-15 (Public Finance)
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- Alan J. Auerbach, 1988. "Capital Gains Taxation in the United States: Realizations, Revenue, and Rhetoric," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 595-638.
- Burman, Leonard E & Randolph, William C, 1994. "Measuring Permanent Responses to Capital-Gains Tax Changes in Panel Data," American Economic Review, American Economic Association, vol. 84(4), pages 794-809, September.
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- Martin Gritsch & Tricia Coxwell Snyder, 2007. "Taxing Options: Do Ceos Respond To Favorable Tax Treatment Of Stock Options?," Eastern Economic Journal, Eastern Economic Association, vol. 33(3), pages 343-357, Summer.
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