Permanent versus Transitory Tax Effects and the Realization of Capital Gains


Journal Article

Recent empirical work on captial gains implies that realizations are highly sensitive to marginal tax rates. Because they are based on cross-section data, however, these estimates cannot distinguish between permanent responses to tax rate changes and the timing of realizations to take advantage of the normal fluctuations in any individual’s tax rates over time. The purpose of this paper is to distinguish transitory from permanent tax effects by analyzing panel data for taxpayers. Controlling for permanent and transitory income and other variables, the estimates suggest both transitory and permanent effects, although the permanent tax rate effect is not significant in all cases. © 1982 by the President and Fellows of Harvard College.

Full Text

Duke Authors

Cited Authors

  • Auten, GE; Clotfelter, CT

Published Date

  • January 1, 1982

Published In

Volume / Issue

  • 97 / 4

Start / End Page

  • 613 - 632

Electronic International Standard Serial Number (EISSN)

  • 1531-4650

International Standard Serial Number (ISSN)

  • 0033-5533

Digital Object Identifier (DOI)

  • 10.2307/1885102

Citation Source

  • Scopus