Scandinavian Working Papers in Business Administration
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2024/10: Wealth Taxation: The Key to Unlocking Capital Gains
Guttorm Schjelderup () and Floris T. Zoutman ()
Additional contact information
Guttorm Schjelderup: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Floris T. Zoutman: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Abstract: We study how wealth taxes affect portfolio choice in the presence of a realization-based tax on capital gains. We develop a two-period model with heterogeneous investors. Capital gains taxations distort portfolio choice by providing an incentive to postpone realization.We show that a wealth tax levied alongside the capital gains tax can eliminate this distortion for all investors. We develop an optimal-tax model that trades of equity gains from the capital-gains and wealth tax to efficiency losses related to intertemporal and portfolio choice, and derive an elasticity-based empirical criterion for the desirability of a wealth tax.
Keywords: Wealth Tax; Capital-gains Tax; Dividend Tax; Lock-in Effect; Capital-market Efficiency
JEL-codes: D14; G51; H21; H24; M21
Language: English
43 pages, September 30, 2024
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