Capital Gains Taxes and the Realization of Capital Gains and Losses - Evidence from German Income Tax Data

Martin Jacob

FinanzArchiv: Public Finance Analysis, 2013, vol. 69, issue 1, 30-56

Abstract: This paper analyzes the influence of capital gains taxation on the decision to realize capital gains and losses when gains are tax-exempt after a certain holding period. Theory predicts that high marginal tax rates incentivize investors to realize taxable losses. In contrast, the propensity to realize taxable short-term capital gains decreases in the marginal tax rate. Using two stratified 10% random samples of all German income tax declarations filed in 2001 and 2004, the paper provides robust evidence for this prediction. The marginal tax rate has a significant and positive (negative) effect on the investor's propensity to realize capital losses (gains).

Keywords: capital gains taxation; capital losses; capital gains; income tax; lock-in effect (search for similar items in EconPapers)
JEL-codes: H21 H24 H25 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:mhr:finarc:urn:sici:0015-2218(201303)69:1_30:cgtatr_2.0.tx_2-7

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DOI: 10.1628/001522108X663460

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