The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates

Ole Agersnap and Owen Zidar
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Ole Agersnap: Princeton University

Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: 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.

JEL-codes: D31 H24 H25 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (3)

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https://scholar.princeton.edu/sites/default/files/zidar/files/capgains.pdf

Related works:
Journal Article: The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates (2021)
Working Paper: The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates (2021)
Working Paper: The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:272

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