Research Report Investor Responsiveness to Capital Gains Taxes During the Great Recession
Timothy Dowd, Robert McClelland, Jacob A. Mortenson
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This paper uses a large panel of transaction-level capital asset sales data to investigate whether tax responsiveness varies with economic conditions. We estimate the tax elasticity associated with a large notch in the capital gains tax schedule, when the tax treatment changes from higher, ordinary income tax rates to lower, preferential tax rates. We estimate this elasticity for each year from 2007 to 2012. Surprisingly, these elasticities were highest during the throes of the financial panic.
Research Areas Taxes and budgets
Tags Individual taxes Federal budget and economy
Policy Centers Urban-Brookings Tax Policy Center