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. Economics Department.

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 10-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.

Keywords: U.S.; Northern America; Revenue; Tax; Taxation (search for similar items in EconPapers)
JEL-codes: E62 H25 H71 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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https://scholar.princeton.edu/sites/default/files/capgains_az.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 (2020)
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:econom:2021-75

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