Taxation and Portfolio Structure

Taxation and Portfolio Structure
Author: James M. Poterba
Publisher:
Total Pages: 68
Release: 2001
Genre: Economics
ISBN:

Overview of how taxation affects household portfolio structure. It begins by outlining six aspects of portfolio behavior that may be influenced by the tax system. These are asset selection, asset allocation, borrowing, asset location in taxable and tax-deferred accounts, asset turnover, and whether to hold assets directly or through financial intermediaries. The analysis considers how ignoring tax considerations may bias estimates of how other variables, such as income or net worth, affect the structure of household portfolios. The paper then describes the tax rules that apply to various portfolio instruments in a range of major industrialized nations. This illustrates the wide variation in the potential impact of tax rules on portfolio choice. Finally, the paper selectively reviews the existing evidence on how taxation affects portfolio choice. A small but growing literature, primarily based on the analysis of U.S. data, suggests that taxes have important effects on several aspects of portfolio choice. There remain a number of decisions, however, for which it appears difficult to reconcile household choices with tax-efficient behavior.

Taxation, Risk-taking, and Household Portfolio Behavior

Taxation, Risk-taking, and Household Portfolio Behavior
Author: James M. Poterba
Publisher:
Total Pages: 91
Release: 2001
Genre: Capital gains tax
ISBN:

This paper summarizes the current state of research on how taxation affects household decisions with respect to portfolio structure and asset trading. It discusses long-standing issues, such as the impact of differential taxation of income flows from stocks and bonds on the incentives for households to invest in these assets, and the effect of capital gains taxation on asset sales. It also addresses a range of emerging issues, such as the impact of taxation on the behavior of mutual funds and their investors, and the effect of tax changes and tax uncertainty on investor behavior. It concludes that taxation exerts a systematic influence on the nature of risk-taking and the structure of household portfolios. Research on the effects of taxation on portfolio structure is more advanced than work on the welfare costs of portfolio distortions

Household Portfolios

Household Portfolios
Author: Luigi Guiso
Publisher: MIT Press
Total Pages: 552
Release: 2002
Genre: Business & Economics
ISBN: 9780262072212

Theoretical and empirical analysis of the structure of household portfolios.

The Charles Schwab Guide to Finances After Fifty

The Charles Schwab Guide to Finances After Fifty
Author: Carrie Schwab-Pomerantz
Publisher: Crown Currency
Total Pages: 434
Release: 2014-04-01
Genre: Business & Economics
ISBN: 0804137374

Here at last are the hard-to-find answers to the dizzying array of financial questions plaguing those who are age fifty and older. The financial world is more complex than ever, and people are struggling to make sense of it all. If you’re like most people moving into the phase of life where protecting—as well as growing-- assets is paramount, you’re faced with a number of financial puzzles. Maybe you’re struggling to get your kids through college without drawing down your life’s savings. Perhaps you sense your nest egg is at risk and want to move into safer investments. Maybe you’re contemplating downsizing to a smaller home, but aren’t sure of the financial implications. Possibly, medical expenses have become a bigger drain than you expected and you need help assessing options. Perhaps you’ll shortly be eligible for social security but want to optimize when and how to take it. Whatever your specific financial issue, one thing is certain—your range of choices is vast. As the financial world becomes increasingly complex, what you need is deeply researched advice from professionals whose credentials are impeccable and who prize clarity and straightforwardness over financial mumbo-jumbo. Carrie Schwab-Pomerantz and the Schwab team have been helping clients tackle their toughest money issues for decades. Through Carrie’s popular “Ask Carrie” columns, her leadership of the Charles Schwab Foundation, and her work across party lines through two White House administrations and with the President’s Advisory Council on Financial Capability, she has become one of America’s most trusted sources for financial advice. Here, Carrie will not only answer all the questions that keep you up at night, she’ll provide answers to many questions you haven’t considered but should.

Dynamic Firm and Investor Behaviour under Progressive Personal Taxation

Dynamic Firm and Investor Behaviour under Progressive Personal Taxation
Author: Geert-Jan C.T.van Schijndel
Publisher: Springer Science & Business Media
Total Pages: 224
Release: 2012-12-06
Genre: Business & Economics
ISBN: 3642466370

This book aims to include the effects of a progressive personal tax into the deterministic dynamic theory of the firm. To this end the author investigates the impact of a progressive personal tax on the optimal dividend, financing and investment policy of a shareholder-controlled, value-maximising firm. More specifically, the principal aim is the justification of the thesis that during each stage of their evolution, firms will be controlled by investors in different tax brackets. With this aim in mind, the author develops a dynamic equilibrium and portfolio theory under certainty, which considers: - the market value of an arbitrary firm such that no excess demand for or supply of shares exists, - the portfolio selection of differently taxed investors, - the succession of differently taxed investors, who possess the shares of any value-maximizing firm, in the course of time, - the optimal resulting policy string and corresponding evolution of a firm in the course of time.

Risk-Taking and Optimal Taxation with Nontradable Human Capital

Risk-Taking and Optimal Taxation with Nontradable Human Capital
Author: Zuliu Hu
Publisher: International Monetary Fund
Total Pages: 22
Release: 1992-12-01
Genre: Business & Economics
ISBN: 1451947429

What are the effects of taxation on individual/entrepreneurs’ risk-taking behavior? This paper re-examines this old question in a continuous time life-cycle model. We demonstrate that the stream of uncertain income from human capital has systematic effects on demand for the risky physical capital asset. If labor supply is inelastic and real wages are known with certainty, then a labor income tax will reduce holdings of the risky physical asset. However, if there are random fluctuations in labor income, then the effect depends on the nature of interaction between wage risk and investment income risk. A labor income tax may actually raise demand for the risky capital asset if human capital risk and physical capital risk are positively correlated. The idiosyncratic risk and nontradability of human capital also have implications for optimal taxation. When the insurance and disincentive effects are jointly taken into account, a Pareto efficient tax structure implies a strictly positive tax rate.