A Study of the Effect of Capital Gains and Personal Tax on an Investor's Optimal Portfolio Selection
Author | : Earl G. Hotrum |
Publisher | : |
Total Pages | : 40 |
Release | : 1976 |
Genre | : Capital gains tax |
ISBN | : |
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Author | : Earl G. Hotrum |
Publisher | : |
Total Pages | : 40 |
Release | : 1976 |
Genre | : Capital gains tax |
ISBN | : |
Author | : Michael Haliassos |
Publisher | : |
Total Pages | : 64 |
Release | : 1993 |
Genre | : Capital gains tax |
ISBN | : |
We provide new data on capital gains realizations using a five-year stratified panel of taxpayers covering 1985-1989. We find, as earlier studies have, that capital gains realizations are very concentrated among the highest income groups. We use these data and data from the Federal Reserve Board Survey of Consumer Finances to draw inferences from a simulation model of the effects on progressivity and efficiency of alternative tax treatment of capital gains. Tax payments alone are not an accurate indication of the burden of a tax. Taxes generally create costs beyond the dollar value collected by causing persons to change their behavior to avoid the tax. Risk is also affected by the tax system. Beneficial risk-sharing characteristics of the tax system are frequently overlooked when examining the treatment of capital gains, We find that reforms comprising reductions in the capital gains tax rate offset by increases in the tax rate on other investment income are efficiency reducing. Surprisingly, we find that for taxpayers for whom loss limits are not binding a switch to accrual taxation is also efficiency reducing. For those taxpayers for whom loss limits are potentially binding, we find that large efficiency gains can be achieved by increasing the amount of capital losses that may be deducted against ordinary income. These results are partly attributable to changes in risk-sharing encompassed in these reforms.
Author | : Chin-sun Yi |
Publisher | : |
Total Pages | : 316 |
Release | : 1986 |
Genre | : Portfolio management |
ISBN | : |
Author | : Kaye A. Thomas |
Publisher | : Fairmark Press Inc. |
Total Pages | : 322 |
Release | : 2004 |
Genre | : Business & Economics |
ISBN | : 0967498112 |
A complete, authoritative guide to taxation of stocks, mutual funds and market-traded stock options.
Author | : Daniel J. Kovenock |
Publisher | : |
Total Pages | : 54 |
Release | : 1985 |
Genre | : Capital gains tax |
ISBN | : |
This paper is an attempt to assess the effect of capital gains taxation on non-Austrian assets, such as claims to profits of continuing enterprises. As compared to taxation on an accrual basis, the capital gains tax discourages sales of appreciated assets. This is the "lock-in" effect. Because assets subject to capital gains taxation are generally held a long time, conventional estimates suggest that the effective rate of capital gains taxation is low. We contend that conventional estimates could seriously underestimate the effective rate of capital gains taxation because they ignore uncertainty. We construct a model which allows us to calculate the value of being able to actively manage a portfolio and use this model to calculate the effective rate of capital gains taxation. For several plausible parameter values the effective rate is significantly higher than estimates under certainty. We also discuss some of the ways in which the lock-in effect may distort the allocation of investment funds and the efficient workings of the capital market
Author | : United States. Congress. Joint Economic Committee |
Publisher | : |
Total Pages | : 20 |
Release | : 1997 |
Genre | : Capital gains tax |
ISBN | : |
Author | : John Keith Butters |
Publisher | : Boston : Graduate School of Business Administration, Harvard University |
Total Pages | : 584 |
Release | : 1953 |
Genre | : Income tax |
ISBN | : |
Author | : Fraser Institute (Vancouver, B.C.) |
Publisher | : The Fraser Institute |
Total Pages | : 36 |
Release | : 2001 |
Genre | : Capital gains tax |
ISBN | : 0889751897 |
Author | : Lorenzo Garlappi |
Publisher | : |
Total Pages | : 54 |
Release | : 2001 |
Genre | : |
ISBN | : |
We analyze the portfolio choice of an investor who can invest in tow risky assets (in addition to a riskless asset) and who is subject to taxes on realized capital gains. These taxes appear in the portfolio choice problem as a form of time-independent, endogenous transaction costs. Similar to the case of portfolio choice with transaction costs, the optimal strategy of the taxable investor contains a quot;no tradequot; region originating from the excercise of the option to defer capital gains taxes. This may lead an investor to hold a markedly undiversified portfolio, for reasonable parameter values. With multiple risky assets the investor is effectively holding a portfolio of tax-deferral options. The value of these options is considerable, in the range of 5-10% of the wealth of an investor with constant relative risk aversion. Such value is decreasing in the volatility and correlation of the assets and in the risk aversion. If the risky assets can be held only through a mutual fund, the investor incurs a cost due to the loss of flexibility whose magnitude is small when assets re positively correlated but can increase considerably as the correlation decreases.