Does a Wealth Tax Discriminate Against Domestic Investors?

20 Pages Posted: 25 Nov 2019

See all articles by Petter Bjerksund

Petter Bjerksund

Norwegian School of Economics (NHH) - Department of Business and Management Science

Guttorm Schjelderup

Norwegian School of Economics (NHH) - Department of Business and Management Science

Date Written: November 7, 2019

Abstract

This paper studies the impact of a capital-income tax and a wealth tax on investor behavior in an efficient capital market under various assumptions regarding uncertainty and time horizons. We show that investors who face capital taxes have a lower discount rate, but that their willingness to pay for a company’s stock is not affected by these taxes. In a second step, we show that if a company owner increases her required rate of return from the company because of capital taxes, she will harm the company’s market value and thus her own wealth.

Keywords: capital-income tax, wealth tax, investor behavior

JEL Classification: G10, G12, H20, H25

Suggested Citation

Bjerksund, Petter and Schjelderup, Guttorm, Does a Wealth Tax Discriminate Against Domestic Investors? (November 7, 2019). NHH Dept. of Business and Management Science Discussion Paper No. 2019/16. Available at SSRN: https://ssrn.com/abstract=3491769 or http://dx.doi.org/10.2139/ssrn.3491769

Petter Bjerksund

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Guttorm Schjelderup (Contact Author)

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

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