TY  - JOUR
AU  - Poterba,James M.
AU  - Samwick,Andrew
TI  - Taxation and Household Portfolio Composition: U.S. Evidence from the 1980s and 1990s
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7392
PY  - 1999
Y2  - October 1999
UR  - http://www.nber.org/papers/w7392
L1  - http://www.nber.org/papers/w7392.pdf
N1  - Author contact info:
James M. Poterba
Department of Economics
MIT, E52-350
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-6673
Fax: 617/258-7804
E-Mail: poterba@nber.org

Andrew Samwick
6106 Rockefeller Hall
Department of Economics
Dartmouth College
Hanover, NH 03755-3514
Tel: 603/646-2893
Fax: 603/646-2122
E-Mail: andrew.samwick@dartmouth.edu
AB  - This paper explores the relationship between household marginal income tax rates, the set of assets that households own, and the portfolio shares accounted for by each of these assets.  It analyzes data from the 1983, 1989, 1992, and 1995 Surveys of Consumer Finances and develops a new algorithm for imputing federal marginal tax rates to households in these surveys.  The empirical findings suggest that a household's marginal tax rate has an important effect its asset allocation decisions.  The probability that a household owns tax-advantaged assets is strongly related to its tax rate on ordinary income.  In addition, the amount of investment through tax-deferred accounts such as 401(k) plans and IRAs is an increasing function of the household's marginal tax rate.  Holdings of corporate stock, which is taxed less heavily than interest bearing assets, and of tax-exempt bonds are also increasing in the household's marginal tax rate.  Holdings of heavily taxed assets, such as corporate bonds and interest-bearing accounts, decline as a share of wealth as a household's marginal tax rate increases.
ER  -