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Investor asset valuation under a wealth tax and a capital income tax

Author

Listed:
  • Petter Bjerksund

    (Norwegian School of Economics and Norwegian Centre for Taxation)

  • Guttorm Schjelderup

    (Norwegian School of Economics, and Norwegian Centre for Taxation and CESifo)

Abstract

We study how a capital income tax and a wealth tax affect an investor's valuation of a company's stock in an efficient international capital market. Using a one-period model, a model of infinite horizon where the asset generates a future cash flow that is a martingale, and a finite horizon model where we abandon the martingale assumption, we find that a wealth tax and/or a capital income tax do not lead investors to value an investment differently from untaxed investors. Investors who seek a higher pre-tax rate of return due to capital taxes harm their own wealth.

Suggested Citation

  • Petter Bjerksund & Guttorm Schjelderup, 2022. "Investor asset valuation under a wealth tax and a capital income tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(4), pages 873-889, August.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:4:d:10.1007_s10797-021-09691-0
    DOI: 10.1007/s10797-021-09691-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Wealth tax; Capital income tax; Rate of return; Investment decisions; Domestic and foreign assets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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