Tax regimes and capital gains realizations
- This paper contrasts the individual capital gains realization behavior between progressive and proportional tax regimes. Using a longitudinal panel of over 288,000 individuals in Sweden, I exploit the 1991 tax reform in Sweden that changed progressive capital gains tax rates ranging from 12% to 80% to a proportional tax rate of 30%. Using the proportional tax system to control for non-tax reasons to realize capital gains, I show that individuals are highly responsive to capital gains tax incentives created by temporary income changes under a progressive capital gains tax. More specifically, I find that individuals with temporary negative (positive) income changes sell (hold) shares that they would hold (sell) in the absence of temporary tax incentives. Further, I show that high-income individuals are more tax sensitive than low-income individuals. This result indicates that low-income individuals facing temporary negative income changes could trade predominantly for non-tax reasons.
Author: | Martin Jacob |
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URN: | urn:nbn:de:hbz:992-opus4-6759 |
DOI: | https://doi.org/10.2139/ssrn.1825147 |
Series (Serial Number): | FAccT Center Working Paper Series (06/2012) |
Publisher: | WHU - Otto Beisheim School of Management |
Place of publication: | Vallendar |
Document Type: | Working Paper |
Language: | English |
Date of Publication (online): | 2018/06/18 |
Date of first Publication: | 2011/11/30 |
Release Date: | 2018/06/18 |
Tag: | Progressivsteuer; Proportionalsteuer; Realisierung von Veräußerungsgewinnen; Spitzeneinkommen Capital gains realizations; Progressive tax; Proportional tax; Top income |
Edition: | June 15, 2016 |
Page Number: | 42 |
Note: | Forthcoming in European Accounting Review |
Institutes: | WHU Centers / WHU Financial Accounting & Tax Center (FAccT Center) |
JEL-Classification: | D Microeconomics / D1 Household Behavior and Family Economics / D14 Personal Finance |
D Microeconomics / D3 Distribution / D31 Personal Income, Wealth, and Their Distributions | |
H Public Economics / H2 Taxation, Subsidies, and Revenue / H20 General | |
H Public Economics / H2 Taxation, Subsidies, and Revenue / H24 Personal Income and Other Nonbusiness Taxes and Subsidies | |
Licence (German): | Copyright for this publication |