Cross-Base Tax Elasticity of Capital Gains

32 Pages Posted: 15 Jul 2014

See all articles by Martin Jacob

Martin Jacob

WHU - Otto Beisheim School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: July 14, 2014

Abstract

This paper studies the cross-base tax elasticity of capital gains realizations to labor income taxes when capital gains are taxed at a separate proportional tax rate. Using a longitudinal panel of over 265,000 individuals in Sweden, this paper shows in a regression kink design that labor income taxes affect capital gains at the extensive and intensive margins. An increase in the marginal labor income tax rate increases the likelihood of realizing capital gains and the amount of realized capital gains. One implication of this result is that the excess burden of labor income taxation is affected by cross-base tax elasticities.

Keywords: Capital Gains, Cross-Base Elasticity, Income Taxes

JEL Classification: H21, H24

Suggested Citation

Jacob, Martin, Cross-Base Tax Elasticity of Capital Gains (July 14, 2014). Available at SSRN: https://ssrn.com/abstract=2466298 or http://dx.doi.org/10.2139/ssrn.2466298

Martin Jacob (Contact Author)

WHU - Otto Beisheim School of Management ( email )

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