CAPITAL GAINS TAX RATES AND STOCK MARKET VOLUME
- 1 December 1990
- journal article
- Published by University of Chicago Press in National Tax Journal
- Vol. 43 (4) , 411-425
- https://doi.org/10.1086/ntj41788862
Abstract
This study examines the relationship between aggregate stock market volume and changes in capital gains tax rates. The tax cuts of 1978 and 1981 usually were found to increase trading. The tests failed to detect any significant decrease in volume due to the increase in the capital gains tax rate in 1987, however. Accordingly, if revenues and tax rates were inversely related around the time of the Tax Reform Act of 1986, as some have chimed, this relationship might be due to a changing mix of sales among stocks with gains and losses or to changing sales volume for other assets. These mechanisms deserve further study, as do non-tax motivations for selling stocks.Keywords
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