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

  • Vijay M. Jog
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    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.

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    File URL: http://links.jstor.org/sici?sici=0317-0861%28199510%2921%3CS116%3ATLCGEC%3E2.0.CO%3B2-2
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    Article provided by University of Toronto Press in its journal Canadian Public Policy.

    Volume (Year): 21 (1995)
    Issue (Month): s1 (November)
    Pages: 116-135

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    Handle: RePEc:cpp:issued:v:21:y:1995:i:s1:p:116-135
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    1. 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.
    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. Stiglitz, Joseph E, 1969. "The Effects of Income, Wealth, and Capital Gains Taxation on Risk-Taking," The Quarterly Journal of Economics, MIT Press, vol. 83(2), pages 263-83, May.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
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