The purpose of this paper is to study whether investors’ willingness to realize capital gains falls when the marginal tax rate on capital gains is raised. We use a rich register-based panel data set covering almost 8% of the Swedish population. The results indicate that a 10% increase in capital gains tax rate reduces the number of realizations of capital gains with 8.7% and the realized amount, given the decision to realize, with 1.9%. In addition, we find that wealthy individuals seem to respond more to changes in capital gains tax rates than less-wealthy.
Daunfeldt, S-O., Praski-Ståhlgren, U. & Rudholm, N. (2010). “Do High Taxes Lock-in Capital Gains? Evidence from a Dual Income Tax System.”Public Choice, 145(1): 25-38.