The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates / Ole Agersnap, Owen M. Zidar.

Format:

Book

Author/Creator:

Agersnap, Ole.

Contributor:

National Bureau of Economic Research.

Zidar, Owen M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27705.

NBER working paper series no. w27705

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

This paper uses a direct-projections approach to estimate the effect of capital gains taxation on realizations at the state level, and then develops a framework for determining revenue-maximizing rates at the federal level. We find that the elasticity of revenues with respect to the tax rate over a ten-year period is -0.5 to -0.3, indicating that capital gains tax cuts do not pay for themselves, and that a 5 percentage point rate increase would yield $18 to $30 billion in annual federal tax revenue. Our long-run estimates yield revenue-maximizing capital gains tax rates of 38 to 47 percent.

Notes:

Print version record

August 2020.