Methods of capital gains taxation and the impact on asset prices and welfare.: An article from: National Tax Journal

This digital document is an article from National Tax Journal, published by National Tax Association on December 1, 2008. The length of the article is 13328 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.

From the author: Taxation of capital gains upon realization instead of accrual provides incentives to hold winners as long as possible and sell losers immediately. This so-called lock-in effect possibly distorts the liquidation and investment decision and, hence, is usually regarded as harmful. This paper analyzes the impact the method of taxation has on asset prices and welfare within a simple general equilibrium model of an exchange economy with heterogeneous agents. It is shown that asset prices are higher under a realization-based tax system than under an accrual one. However, due to distributional effects, total welfare is not necessarily lower.

Citation Details
Title: Methods of capital gains taxation and the impact on asset prices and welfare.
Author: Marco Sahm
Publication:National Tax Journal (Magazine/Journal)
Date: December 1, 2008
Publisher: National Tax Association
Volume: 61 Issue: 4 Page: 743(26)

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