Permanent and Transitory Responses to Capital Gains Taxes: Evidence from a Lifetime Exemption in Canada

Capital gains taxes on housing ¤

Recent years have seen large swings in house prices in many countries. Motivated by housing price variations, proposals for taxing capital gains (nominal or real) on housing have repeatedly been put forth. The idea seems to be that such taxes would curb the redistribution occurring between those owning houses and those trying to get into the market for owner-occupied housing. Our paper shows th...

Capital Gains Taxes and Realizations: Evidence from a Long Panel of State-Level Data

We estimate how capital gains realizations respond to marginal tax rates on capital gains using a panel of aggregate data for U.S. states for the years 1957 through 2007. In specifications controlling for state fixed effects and year fixed effects, where identification comes from difference-in-differences variation in effective state marginal tax rates, our point estimate of the elasticity of c...

Capital Gains Taxes and Portfolio Rebalancing

The major friction that investors face in rebalancing their portfolios is capital gains taxes, which are triggered by the sale of assets. In this article, we examine the impact of an investor’s capital gains tax liability and existing risk exposure upon the optimal portfolio and rebalancing decisions. We capture the trade-off over the investor’s lifetime between the tax costs and diversificatio...

Capitalization of capital gains taxes: evidence from stock price reactions to the 1997 rate reduction

We empirically document that stock prices moved inversely with dividend yields during the May, 1997 week when the White House and Congress agreed on a budget accord that included a reduction in the capital gains tax rate. The findings are consistent with equity prices capitalizing expected capital gains taxes. Two scenarios are possible. First, to the extent returns are expected to be taxed as ...

The case for the elimination of capital gains taxes in Canada