Venture Capital and Capital Gains Taxation
This paper investigates the links between capital gains taxation and the level of venture capital activity. I examine two explanations of how reducing the personal capital gains tax rate may spur venture capital: the first focuses on the supply of funds to the venture industry, and the second on the supply of entrepreneurs. The supply of funds is unlikely to be the principal mechanism through which the tax affects venture capital, since less than half of venture investors face individual capital gains tax liability on their realized gains. Moreover, most of the growth in venture funding during the last decade has come from tax-exempt investors. Individual capital gains taxes may however have a significant influence on the demand for venture funds. These taxes have an important impact on the incentives of entrepreneurs and other employees of start-up firms who forego wage and salary income and accept compensation through corporate stock and options. The paper closes by noting that reducing the tax rate on all gains is a relatively blunt device for encouraging venture investment. Venture investments account for less than one percent of realized capital gains.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Nov 1988|
|Date of revision:|
|Contact details of provider:|| Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA|
Phone: (617) 253-3361
Fax: (617) 253-1330
Web page: http://econ-www.mit.edu/
More information through EDIRC
|Order Information:|| Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph E. Stiglitz, 1983.
"Some Aspects of the Taxation of Capital Gains,"
NBER Working Papers
1094, National Bureau of Economic Research, Inc.
- James M. Poterba, 1986.
"How Burdensome Are Capital Gains Taxes?,"
410, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- Poterba, James M., 1987. "How burdensome are capital gains taxes?: Evidence from the United States," Journal of Public Economics, Elsevier, vol. 33(2), pages 157-172, July.
When requesting a correction, please mention this item's handle: RePEc:mit:worpap:508. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Linda Woodbury)
If references are entirely missing, you can add them using this form.