Retrospective Capital Gains Taxation
DOI:
https://doi.org/10.1016/1057-0810(91)90051-YAbstract
This paper presents a new approach to the taxation of capital gains that eliminates the deferral advantage of realization-based systems, along with the lock- in effect and tax-arbitrage possibilities associated with this deferral advantage. The new method still taxes capital gains only upon realization but, effectively by charg- ing interest on past gains when realization finally occurs, eliminates the incentive to defer such realization. Unlike a similar scheme suggested previously by Vickrey, the present method does not require knowledge of the potentially unobservable pattern of gains over time. It thus is applicable to a very broad range of capital assets. The American EconomicReview, Vol. 81, No. 1(March 1991), pp. 167-178. (Reprinted with permission of the American Economic Association.)
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