Capital Gains Realizations of the Rich and Sophisticated
This paper attempts to bring theoretical and empirical research on capital gains realization behavior closer together by considering whether investors who appear to engage more in strategic tax avoidance activity also respond differently to tax rates. We find that such investors exhibit significantly smaller responses to permanent tax rate changes than other investors. Put another way, a larger part of their response to capital gains tax rates reflects timing, consistent with their closer adherence to tax avoidance strategies emphasizing arbitrage based on tax rate differentials. This finding holds for two alternative specifications of realization behavior, one of which suggests larger permanent responses to capital gains tax rates than those of previous panel studies.
|Date of creation:||Feb 2000|
|Publication status:||published as Auerbach, Alan J. and Jonathan M. Siegel. "Capital Gains Realizations Of The Rich And Sophisticated," American Economic Review, 2000, v90(2,May), 276-282.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- 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.
- 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.
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