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Ex-Post Equivalence under Capital Gains Taxation

Author

Listed:
  • Francesco Menoncin

    (UNIVERSITY OF BRESCIA)

  • Paolo M. Panteghini

    (UNIVERSITY OF BRESCIA, CESIFO AND ACCOUNTAX LAB)

Abstract

In this article, we analyze a state-contingent tax on capital gains. We start by focusing on Auerbach's (1991) retrospective capital gains tax device. Although this system is equivalent to an accrual method from an ex-ante perspective, it is not on an ex-post basis. As recognized by Auerbach, this causes a fairness problem. To overcome this limitation, we follow Zhu (1992) and design a state-contingent tax rule. As will be proven, state-contingent taxation can modify the risk profile of assets and also ensure ex-post equivalence.

Suggested Citation

  • Francesco Menoncin & Paolo M. Panteghini, 2012. "Ex-Post Equivalence under Capital Gains Taxation," Economics Bulletin, AccessEcon, vol. 32(2), pages 1671-1679.
    • Handle: RePEc:ebl:ecbull:eb-11-00725
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    capital gains; risk and taxation.;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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