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The Lifetime Capital Gains Exemption: Corporate Financing, Risk-taking and Allocation Efficiency

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  • Vijay M. Jog

Abstract

The impact of LCGE on financing of Canadian corporations and investment and risk-taking behaviour of individual Canadians is examined. The post-LCGE period shows a significantly higher reliance on external equity by large corporations, an increase in the number of taxpayers reporting dividend and foreign income. Also clear is the marked increase in 'unlocking' of capital gains. These trends seem to be specific to Canada; no such trends are found for U.S. corporations or taxpayers. The direction and the magnitude of these trends are consistent with the intent of the LCGE. The question of causality may still be open for debate.

Suggested Citation

  • Vijay M. Jog, 1995. "The Lifetime Capital Gains Exemption: Corporate Financing, Risk-taking and Allocation Efficiency," Canadian Public Policy, University of Toronto Press, vol. 21(s1), pages 116-135, November.
  • Handle: RePEc:cpp:issued:v:21:y:1995:i:s1:p:116-135
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    References listed on IDEAS

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    1. George R. Zodrow, 1995. "Economic Issues in the Taxation of Capital Gains," Canadian Public Policy, University of Toronto Press, vol. 21(s1), pages 27-57, November.
    2. Poterba, James M., 1989. "Capital Gains Tax Policy Toward Entrepreneurship," National Tax Journal, National Tax Association, vol. 42(3), pages 375-89, September.
    3. Jack M. Mintz & Thomas A. Wilson, 1995. "Realization and Revenue Effects of Lifetime Capital Gains Exemptions," Canadian Public Policy, University of Toronto Press, vol. 21(s1), pages 174-192, November.
    4. J. E. Stiglitz, 1969. "The Effects of Income, Wealth, and Capital Gains Taxation on Risk-Taking," The Quarterly Journal of Economics, Oxford University Press, vol. 83(2), pages 263-283.
    5. Michael Haliassos & Andrew B. Lyon, 1993. "Progressivity of Capital Gains Taxation with Optimal Portfolio Selection," NBER Working Papers 4253, National Bureau of Economic Research, Inc.
    6. Henderson, Yolanda K., 1990. "Capital Gains Tax Rates and Stock Market Volume," National Tax Journal, National Tax Association;National Tax Journal, vol. 43(4), pages 411-425, December.
    7. 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.
    8. Vijay M. Jog & Huntley Schaller, 1995. "Retirement Income and the Lifetime Capital Gains Exemption: The Case of Qualified Farm Property and Small Business Corporation Shares," Canadian Public Policy, University of Toronto Press, vol. 21(s1), pages 136-158, November.
    9. McClure, J. Jr., 1992. "Does reducing the capital gains tax rate raise or lower investment?," Economics Letters, Elsevier, vol. 40(2), pages 207-210, October.
    10. Poterba, James M., 1989. "Capital Gains Tax Policy Toward Entrepreneurship," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(3), pages 375-389, September.
    11. Henderson, Yolanda K., 1990. "Capital Gains Tax Rates and Stock Market Volume," National Tax Journal, National Tax Association, vol. 43(4), pages 411-25, December.
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    Cited by:

    1. James B. Davies, 1995. "Distributional Effects of the Lifetime Capital Gains Exemption: Single vs. Multi-Year Analysis," Canadian Public Policy, University of Toronto Press, vol. 21(s1), pages 159-173, November.

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