Capital Gains Realizations of the Rich and Sophisticated

16 Pages Posted: 22 Mar 2000 Last revised: 15 Oct 2010

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Jonathan M. Siegel

University of California, Berkeley - Department of Economics

Date Written: February 2000

Abstract

This paper attempts to bring theoretical and empirical research on capital gains realization behavior closer together by considering whether investors who appear to engage more in strategic tax avoidance activity also respond differently to tax rates. We find that such investors exhibit significantly smaller responses to permanent tax rate changes than other investors. Put another way, a larger part of their response to capital gains tax rates reflects timing, consistent with their closer adherence to tax avoidance strategies emphasizing arbitrage based on tax rate differentials. This finding holds for two alternative specifications of realization behavior, one of which suggests larger permanent responses to capital gains tax rates than those of previous panel studies.

Suggested Citation

Auerbach, Alan Jeffrey and Siegel, Jonathan M., Capital Gains Realizations of the Rich and Sophisticated (February 2000). NBER Working Paper No. w7532. Available at SSRN: https://ssrn.com/abstract=215977

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-0711 (Phone)
510-643-0413 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Jonathan M. Siegel

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
39
Abstract Views
950
PlumX Metrics