Document Type
Article
Publication Date
7-27-2013
Publisher
Boston University School of Law
Language
en-US
Abstract
Conventional wisdom is that preferential taxation of property income elevates asset values above their values in the absence of a tax, with those values strictly increasing in the marginal rate of the holder. I show that preferential tax rates (such as the rate on realized long-term capital gains) do indeed have that property. Preferential timing on the other hand -- pure "tax deferral" -- does not. The value of an asset subject to pure deferral does increase with the holder’s marginal rate, but only up to a point, at some marginal rate in excess of 50 percent. With increases in the marginal rate beyond that point, the value of the asset declines, approaching its value in the absence of a tax as the marginal rate approaches 100 percent. Disadvantageous timing has exactly the opposite effect. As far as I can tell these properties have not hitherto been noticed.
Recommended Citation
Theodore S. Sims,
A Tale of Four Treatments: Preferential Taxation and Asset Valuation
,
in
No. 13-42
Boston University School of Law, Law and Economics Research Paper Series
(2013).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/22
