TY  - JOUR
AU  - Poterba,James M.
TI  - Taxation and Portfolio Structure: Issues and Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8223
PY  - 2001
Y2  - April 2001
UR  - http://www.nber.org/papers/w8223
L1  - http://www.nber.org/papers/w8223.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
AB  - overview of how taxation affects household portfolio structure.  It begins by outlining six aspects of portfolio behavior that may be influenced by the tax system. These are asset selection, asset allocation, borrowing, asset location in taxable and tax-deferred accounts, asset turnover, and whether to hold assets directly or through financial intermediaries.  The analysis considers how ignoring tax considerations may bias estimates of how other variables, such as income or net worth, affect the structure of household portfolios. The paper then describes the tax rules that apply to various portfolio instruments in a range of major industrialized nations. This illustrates the wide variation in the potential impact of tax rules on portfolio choice.  Finally, the paper selectively reviews the existing evidence on how taxation affects portfolio choice.  A small but growing literature, primarily based on the analysis of U.S. data, suggests that taxes have important effects on several aspects of portfolio choice.  There remain a number of decisions, however, for which it appears difficult to reconcile household choices with tax-efficient behavior.
ER  -