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BPEA Article

Capital Gains Taxation in the United States: Realizations, Revenue, and Rhetoric


IN 1985, individuals filing U.S. tax returns reported $166.4 billion of long-term capital gains in excess of short-term capital losses. The following year Congress enacted a significant increase in capital gains taxes effective in 1987, and capital gains realizations for 1986 nearly doubled, to $324.8 billion.2 That investors' expectations of tax changes would alter their realization practices markedly comes as no surprise. How changing rates would affect tax revenues and realizations in the longer run is not as obvious.


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