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Heterogeneity in the Tax Responses of Personal Capital Gains Realizations

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  • Dowd, Tim
  • McClelland, Robert
  • Muthitacharoen, Athiphat

Abstract

This article investigates the heterogeneity in the tax elasticities of personal capital gains realizations. We first examine the skewed nature of both capital gains assets ownership and their realizations. We then briefly review earlier studies, including Dowd, McClelland, and Muthitacharoen (2012). Although not chosen for this purpose, the semi-log specification used in that study allows us to explore variation in elasticity estimates across taxpayers. Finally, we focus on variation in tax responses among different assets. The elasticities of corporate stock and mutual funds are lower than our overall elasticity, while the elasticity of bonds is greater.

Suggested Citation

  • Dowd, Tim & McClelland, Robert & Muthitacharoen, Athiphat, 2012. "Heterogeneity in the Tax Responses of Personal Capital Gains Realizations," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 827-840, December.
    • Handle: RePEc:ntj:journl:v:65:y:2012:i:4:p:827-40
    DOI: 10.17310/ntj.2012.4.05
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    1. Martin Feldstein & Joel Slemrod & Shlomo Yitzhaki, 1980. "The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 777-791.
    2. Gerald E. Auten & Joseph J. Cordes, 1991. "Policy Watch: Cutting Capital Gains Taxes," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 181-192, Winter.
    3. Gerald E. Auten & Charles T. Clotfelter, 1982. "Permanent versus Transitory Tax Effects and the Realization of Capital Gains," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(4), pages 613-632.
    4. Tim Dowd & Robert McClelland & Athiphat Muthitacharoen, 2012. "New Evidence on the Tax Elasticity of Capital Gains: Working Paper 2012-09," Working Papers 43334, Congressional Budget Office.
    5. Arthur B. Kennickell & Martha Starr-McCluer, 1994. "Changes in family finances from 1989 to 1992: evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 861-882.
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