Wealth Taxation: The Key to Unlocking Capital Gains

Guttorm Schjelderup and Floris Zoutman

No 12254, CESifo Working Paper Series from CESifo

Abstract: This paper analyzes how a wealth tax affects investor portfolio choice when a realization-based capital gains tax is present. We develop a two-period model with heterogeneous investors and show that while a capital gains tax distorts portfolio choice by encouraging investors to postpone realization, a wealth tax can eliminate this distortion and enhance efficient portfolio choice. Our optimal-tax model balances the equity gains from both taxes against efficiency losses related to intertemporal and portfolio choice. We use the model to derive an elasticity-based criterion for empirically evaluating the desirability of a wealth tax.

Keywords: wealth tax; capital-gains tax; dividend tax; lock-in effect; capital-market efficiency (search for similar items in EconPapers)
JEL-codes: D14 G51 H21 H24 M21 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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