Wealth Taxation: The Key to Unlocking Capital Gains
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Series
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Speaker(s)Floris Zoutman (NHH Norwegian School of Economics, Norway)
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FieldMacroeconomics
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LocationErasmus University Rotterdam, Polak 2-14
Rotterdam -
Date and time
October 07, 2024
11:30 - 12:30
Abstract
We study how wealth taxes affect portfolio choice in the presence of a realization-based tax on capital gains. We develop a two-period model with heterogeneous investors. Capital gains taxations distort portfolio choice by providing an incentive to postpone realization. We show that a wealth tax levied alongside the capital gains tax can eliminate this distortion for all investors. We develop an optimal-tax model that trades of equity gains from the capital-gains and wealth tax to efficiency losses related to intertemporal and portfolio choice, and derive an elasticity-based empirical criterion for the desirability of a wealth tax.