Timothy Dowd

May 10, 2024 | taxpolicycenter.org | Timothy Dowd |Robert McClelland |Livia Mucciolo |Safia Sayed

Understanding how capital gains realizations respond to changes in capital gains tax rates is critical for understanding the potential revenue effects of these changes. A frequently relied on estimate of this responsiveness, or elasticity, comes from Dowd, McClelland, and Muthitacharoen (2015). Using individual-level federal tax return data, they found a short-term (within the current year) tax elasticity of -1.2 and a long-term (beyond the current year) tax elasticity of -0.72.