TY  - JOUR
AU  - Auerbach,Alan J.
AU  - Burman,Leonard E.
AU  - Siegel,Jonathan
TI  - Capital Gains Taxation and Tax Avoidance: New Evidence from Panel Data
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6399
PY  - 1998
Y2  - February 1998
UR  - http://www.nber.org/papers/w6399
L1  - http://www.nber.org/papers/w6399.pdf
N1  - Author contact info:
Alan J. Auerbach
Department of Economics
508-1 Evans Hall, #3880
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-0711
Fax: 510/643-0413
E-Mail: auerbach@econ.berkeley.edu

Leonard E. Burman
Center for Policy Research
426 Eggers Hall
Syracuse, NY 13244
Tel: 315/443-2692
Fax: 315/443-1081
E-Mail: leburman@maxwell.syr.edu

Jonathan M. Siegel
Office of Tax Analysis
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Tel: 202/622-6241
E-Mail: jonathan.siegel@do.treas.gov
AB  - Previous theoretical analyses of the capital gains tax have suggested that investors have considerable opportunity to avoid the tax.  Yet, past empirical work has found relatively little evidence of such activity.  Using a previously unavailable panel data set with a very large sample of high-income individuals, this paper aims to bring the theory and evidence closer together by examining the behavior of individual taxpayers over time. Though confirming past findings that avoidance of tax on realized capital gains is not prevalent, we do observe that tax avoidance activity increased after the passage of the Tax Reform Act of 1986, and that high-income, high-wealth and more sophisticated taxpayers were most likely to avoid tax.  However, the efficacy of tax avoidance strategies depends on being able to avoid tax for long periods, and we find that most tax avoidance is of relatively short duration.  Thus, the effective tax rate on realized capital gains is very close to the statutory rate in all years and tax brackets.
ER  -