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Capital Gains Taxes and the Realization of Capital Gains and Losses - Evidence from German Income Tax Data

  • Martin Jacob
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    This paper analyzes the influence of capital gains taxation on the decision to realize capital gains and losses when gains are tax-exempt after a certain holding period. Theory predicts that high marginal tax rates incentivize investors to realize taxable losses. In contrast, the propensity to realize taxable short-term capital gains decreases in the marginal tax rate. Using two stratified 10% random samples of all German income tax declarations filed in 2001 and 2004, the paper provides robust evidence for this prediction. The marginal tax rate has a significant and positive (negative) effect on the investor's propensity to realize capital losses (gains).

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    File URL: http://www.ingentaconnect.com/content/mohr/fa/2013/00000069/00000001/art00002
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    Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

    Volume (Year): 69 (2013)
    Issue (Month): 1 (March)
    Pages: 30-56

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    Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201303)69:1_30:cgtatr_2.0.tx_2-7
    DOI: 10.1628/001522108X663460
    Contact details of provider: Web page: https://www.mohr.de/fa

    Order Information: Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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    1. Joshua D. Angrist, 2000. "Estimation of Limited-Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," NBER Technical Working Papers 0248, National Bureau of Economic Research, Inc.
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    6. B. Douglas Bernheim, 1999. "Taxation and Saving," NBER Working Papers 7061, National Bureau of Economic Research, Inc.
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    8. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1998. "The Effect of Tax-Favored Retirement Accounts on Capital Accumulation," American Economic Review, American Economic Association, vol. 88(4), pages 749-68, September.
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    10. Orazio P. Attanasio & Thomas DeLeire, 2002. "The Effect Of Individual Retirement Accounts On Household Consumption And National Saving," Economic Journal, Royal Economic Society, vol. 112(6), pages 504-538, July.
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