The Tax Elasticity of Capital Gains Realizations: Evidence from a Panel of Taxpayers

Joel Slemrod, William Shobe

NBER Working Paper No. 3237
Issued in January 1990
NBER Program(s):   PE

This paper examines a newly available six-year panel of tax return data to see what light it sheds on the tax elasticity of capital gains realizations. Panel data are a particularly valuable source of evidence for this question, because they can help to distinguish short-run from long-run effects and because they track the behavior of individuals when faced with varying tax systems. We find consistent, although not overwhelming, support for an inverse response of capital gains realizations to changes in their rate of taxation. The response to deviations from past tax rates generally exceeds the response to persistent tax changes. The estimated magnitude of the realization response is large enough to substantially mitigate the revenue loss that a tax reduction would otherwise cause and may, especially in the short run, be large enough to generate an increase in revenues. These results, however, must be qualified by their nonrobustness to specification changes along a number of dimensions and by the fact that a more general dynamic specification does not yield plausible results.

download in pdf format
   (295 K)

download in djvu format
   (222 K)

email paper

This paper is available as PDF (295 K) or DjVu (222 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3237

Published: NTJ, Vol. 42, no. 4 (1989): 503-508.

Users who downloaded this paper also downloaded these:
Hendershott, Toder, and Won w3386 Revenue and Welfare Implications for a Capital Gains Tax Cut
Slemrod w0257 The Lock-In Effect of the Capital Gains Tax: Some Time Series Evidence
Bogart and Gentry w4254 Capital Gains Taxation and Realizations: Evidence from Interstate Comparisons
Auerbach and Siegel w7532 Capital Gains Realizations of the Rich and Sophisticated
Lindsey Capital Gains Rates, Realizations, and Revenues
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us