Data and code for: "The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates"

Principal Investigator(s): View help for Principal Investigator(s) Ole Agersnap, Princeton University; Owen Zidar, Princeton University

Version: View help for Version V1

Name	File Type	Size	Last Modified
data			01/15/2021 09:56:AM
do			02/11/2021 03:24:PM
dump			02/11/2021 01:07:PM
out			01/15/2021 09:56:AM
README.pdf	application/pdf	160.5 KB	02/11/2021 10:50:AM
list_figures_tables.xlsx	application/vnd.openxmlformats-officedocument.spreadsheetml.sheet	11.5 KB	01/15/2021 04:56:AM
list_raw_datasets.xlsx	application/vnd.openxmlformats-officedocument.spreadsheetml.sheet	11 KB	02/11/2021 10:28:AM

Project Citation:

Agersnap, Ole, and Zidar, Owen. Data and code for: “The Tax Elasticity of Capital Gains and Revenue-Maximizing Rates.” Nashville, TN: American Economic Association [publisher], 2021. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2021-11-23. https://doi.org/10.3886/E129641V1

Project Description

Summary: This paper uses a direct-projections approach to estimate the effect of capital gains taxation on realizations at the state level, and then develops a framework for determining revenue-maximizing rates at the federal level. We find that the elasticity of revenues with respect to the tax rate over a ten-year period is -0.5 to -0.3, indicating that capital gains tax cuts do not pay for themselves, and that a 5 percentage point rate increase would yield $18 to $30 billion in annual federal tax revenue. Our long-run estimates yield revenue-maximizing capital gains tax rates of 38 to 47 percent.

Funding Sources: National Science Foundation. Directorate for Social, Behavioral and Economic Sciences (1752431)

Scope of Project

Subject Terms: capital gains; tax revenues; tax rates; tax policy

JEL Classification:
      H20 Taxation, Subsidies, and Revenue: General
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation
      H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
      H25 Business Taxes and Subsidies including sales and value-added (VAT)
      H31 Fiscal Policies and Behavior of Economic Agents: Household
      H71 State and Local Taxation, Subsidies, and Revenue

Geographic Coverage: United States of America, United Kingdom

Time Period(s): 1913 – 2019

Collection Date(s): 1/21/2019 – 11/23/2020

Universe: Most of our analysis uses data at the U.S. state level (e.g. state tax rates, total capital gains realizations, state GDP). Some elements of the analysis also rely on data at the U.S. federal level (e.g. CPI, federal tax rates) as well as at the national level in the U.K. (capital gains tax rates and realizations).

Data Type(s): aggregate data

Methodology

Unit(s) of Observation: U.S. state by year, U.S. federal by year, U.K. national by year

Geographic Unit: U.S. state

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V1 [2021-11-23]

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