Inflation and the Excess Taxation of Capital Gains on Corporate Stock / Martin Feldstein, Joel Slemrod.

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Feldstein, Martin

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0234.Publication details: Cambridge, Mass. National Bureau of Economic Research 1978.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: The present study shows that in 1973 individuals paid nearly $500 million of extra tax on corporate stock capital gains because of the distorting effect of inflation. A detailed analysis shows that the distortion was greatest for middle income sellers of corporate stock. In 1973, individuals paid capital gains tax on more than $4.5 billion of nominal capital gains on corporate stock. If the costs of these shares are adjusted for the increases in the consumer price level since they were purchased, the $4.5 billion nominal gain becomes a real capital loss of nearly $1 billion. As a result of this incorrect measurement of capital gains, individuals with similar real capital gains were subject to very different total tax liabilities. These findings are based on a new body of official tax return data on individual sales of corporate stock.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0234 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w0231 Who Puts the Inflation Premium Into Nominal Interests Rates? /	nber w0232 Inflation, Tax Rules, and the Long Term Interest Rates /	nber w0233 Job Mobility and Earnings Over the Life Cycle /	nber w0234 Inflation and the Excess Taxation of Capital Gains on Corporate Stock /	nber w0235 Price Inflation, Portfolio Choice, and Nominal Interest Rates /	nber w0236 The Supply of Surgeons and the Demand for Operations /	nber w0237 Interest Rate Risk and Capital Adequacy For Traditional Banks and Financial Intermediaries /	Next

February 1978.

The present study shows that in 1973 individuals paid nearly $500 million of extra tax on corporate stock capital gains because of the distorting effect of inflation. A detailed analysis shows that the distortion was greatest for middle income sellers of corporate stock. In 1973, individuals paid capital gains tax on more than $4.5 billion of nominal capital gains on corporate stock. If the costs of these shares are adjusted for the increases in the consumer price level since they were purchased, the $4.5 billion nominal gain becomes a real capital loss of nearly $1 billion. As a result of this incorrect measurement of capital gains, individuals with similar real capital gains were subject to very different total tax liabilities. These findings are based on a new body of official tax return data on individual sales of corporate stock.