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Measuring Permanent Responses to Capital-Gains Tax Changes in Panel Data

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  • Burman, Leonard E
  • Randolph, William C

Abstract

The authors use panel data and information about differences in state tax rates to separate the effects of transitory and permanent tax rate changes on capital-gains realizations behavior. The estimated effect of permanent change is substantially smaller than the effect of transitory change. The difference is even larger than differences between estimates from past micro data studies, which have primarily measured the transitory effect, and time-series studies, which have primarily measured the permanent effect. The authors' results resolve a long-standing conflict between micro data and time-series studies of how marginal tax rates affect capital-gains realizations behavior. Copyright 1994 by American Economic Association.

Suggested Citation

  • 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.
  • Handle: RePEc:aea:aecrev:v:84:y:1994:i:4:p:794-809
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    References listed on IDEAS

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    1. Kiefer, Donald W., 1990. "Lock-in Effect Within a Simple Model of Corporate Stock Trading," National Tax Journal, National Tax Association;National Tax Journal, vol. 43(1), pages 75-94, March.
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    4. Burman, Leonard E. & Clausing, Kimberly A. & O'Hare, John F., 1994. "Tax Reform and Realizations of Capital Gains in 1986," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 1-18, March.
    5. 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, Oxford University Press, vol. 94(4), pages 777-791.
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    11. Auten, Gerald E. & Burman, Leonard E. & Randolph, William C., 1989. "Estimation and Interpretation of Capital Gains Realization Behavior: Evidence From Panel Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(3), pages 353-374, September.
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    17. Auten, Gerald E. & Burman, Leonard E. & Randolph, William C., 1989. "Estimation and Interpretation of Capital Gains Realization Behavior: Evidence from Panel Data," National Tax Journal, National Tax Association, vol. 42(3), pages 353-74, September.
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