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Do high taxes lock-in capital gains? Evidence from a dual income tax system


The purpose of this paper is to study whether investors’ willingness to realize capital gains falls when the marginal tax rate on capital gains is raised. We use a rich register-based panel data set covering almost 8% of the Swedish population. The results indicate that a 10% increase in capital gains tax rate reduces the number of realizations of capital gains with 8.7% and the realized amount, given the decision to realize, with 1.9%. In addition, we find that wealthy individuals seem to respond more to changes in capital gains tax rates than less-wealthy.

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Correspondence to Sven-Olov Daunfeldt.

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Daunfeldt, SO., Praski-Ståhlgren, U. & Rudholm, N. Do high taxes lock-in capital gains? Evidence from a dual income tax system. Public Choice 145, 25–38 (2010).

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  • Capital gains realizations
  • Tax avoidance
  • Tax policy
  • Panel data

JEL Classification

  • H24
  • H31