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.

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Metadaten
Author:Martin Jacob
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