The Effect of the Timing and Direction of Capital Gain Tax Changes on Investment in Risky Assets

2012 ◽  
Vol 88 (2) ◽  
pp. 499-520 ◽  
Author(s):  
Diana Falsetta ◽  
Timothy J. Rupert ◽  
Arnold M. Wright
Keyword(s):  
Mental Accounting ◽  
Data Availability ◽  
Capital Gain ◽  
Tax Law ◽  
Risky Assets ◽  
Risky Investment ◽  
Hedonic Editing ◽  
Tax Changes

ABSTRACT This study examines the effect of timing (gradual versus immediate) and direction (tax increase or decrease) of a tax change on taxpayer behavior. Specifically, we focus on capital gain tax changes and preferences for investment in riskier assets. We run an experiment with 117 participants who allocate investment dollars between two funds of differing risk. Drawing on mental accounting and hedonic editing (Thaler 1985; Thaler and Johnson 1990), we posit that a tax decrease (a “gain”) implemented gradually over several years will result in a greater increase in risky investment once the decrease is fully implemented than when the tax change is implemented all at once. In contrast, once a tax increase (a “loss”) is fully implemented, a smaller decrease in risky investment will result when the change occurs all at once rather than gradually. Our findings support these expectations, suggesting that the manner of implementing a tax law change may impact decisions. Data Availability: Contact the authors.

scholarly journals Marginal Tax Changes with Risky Investment

2021 ◽  
Author(s):  
Patrick Macnamara ◽  
Myroslav Pidkuyko ◽  
Raffaele Rossi
Keyword(s):  
Risky Investment ◽  
Tax Changes

scholarly journals Tax Changes Enacted By The Patient Protection And Affordable Care Act Of 2010 And The American Taxpayer Relief Act Of 2012

2013 ◽  
Vol 12 (1) ◽  
pp. 11 ◽  
Author(s):  
William A. Bottiglieri
Keyword(s):  
Health Care ◽  
Affordable Care Act ◽  
Health Reform ◽  
Health Care Industry ◽  
Tax Law ◽  
Income Levels ◽  
Care Industry ◽  
Patient Protection ◽  
Tax Changes ◽  
The U.S

Close to three years ago, Congress enacted legislation that overhauls the U.S. health care system and at the same times affects nearly all taxpayers, many employers, and many elements of the health care industry. The sweeping new health reform law embodied in this legislation pays for its cost through tax increases in a number of ways The American Taxpayer Relief Act of 2012 similarly affects many taxpayers with numerous changes in the tax law which either increase or decrease a taxpayers burden depending on income levels.

scholarly journals PERHITUNGAN NILAI BETA DARI BEBERAPA SAHAM UNGGULAN DI INDONESIA DENGAN MENGGUNAKAN METODE GARCH

2016 ◽  
Vol 5 (2) ◽  
pp. 67
Author(s):  
NI KADEK PUSPITAYANTI ◽  
KOMANG DHARMAWAN ◽  
I PUTU EKA N. KENCANA
Keyword(s):  
Stock Returns ◽  
Capital Market ◽  
Stock Price ◽  
Secondary Data ◽  
Capital Gain ◽  
Economic Factors ◽  
Risky Assets ◽  
Daily Data ◽  
The Capital Market

The objective of investment in the capital market is to acquire dividends and capital gain. The fact proves that the advantage of investation risky assets is uncertain . This is because of the difficulty in analyzing and predicting Return and stock losses due to factors that affect the movement of the stock price , such as economic factors , political , social , and security. The model can be used by investors in predicting stock returns expected that Generalized Autoregressive Conditional Heteroscedaticity (GARCH). In this study calculations beta value of some leading stocks in Indonesia by using Generalized Autoregressive Conditional Heteroscedaticity (GARCH) are presented . The data used this search is secondary data covering daily data sampled 5 shares of PT Unilever Indonesia Tbk , PT Indosat Tbk , PT Indofood Sukses Makmur Tbk , PT Telkom Indonesia Tbk , PT Holcim Indonesia Tbk. From the results described fifth beta value of these shares using the method GARCH beta greater than the market in the period from 23 September 2013 until 24 September 2014.

scholarly journals A Formula For Job Creation: Tax Law Changes For Small Businesses

2011 ◽  
Vol 5 (2) ◽  
Author(s):  
Patricia T. Papachristou ◽  
James O. Parker
Keyword(s):  
Small Businesses ◽  
Job Creation ◽  
Tax Law ◽  
Font Size ◽  
Job Growth ◽  
Survival And Growth ◽  
Tax Changes ◽  
New Jobs ◽  
Tax Cuts

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-layout-grid-align: none;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;;"><span style="font-size: x-small;">The Bush tax cuts in 2001 (Economic Growth and Taxpayer Relief Reconciliation Act, (EGTRRA) and in 2003 (Job Growth and Taxpayer Relief Reconciliation Act, JGTRRA) are touted as providing an aid to the economy's recovery and job creation. The data shows that George Bush's first administration had the most anemic job expansion in decades and actually saw negative net jobs created. We advocate four tax changes for small businesses that would postpone the timing of taxes and make it easier for small businesses to survive. As small businesses provide more than two-thirds of the net new jobs created each year, insuring their sustainability will go a long way to foster small business expansion and more job growth among suppliers. Currently a third of new small businesses fail within their first two years and the failure rate exceeds 60 percent by the end of the sixth year. These tax proposals for small businesses resemble &ldquo;laser surgery&rdquo; for the economy instead of the &ldquo;chemotherapy&rdquo; of tax cuts for the whole economy. These proposals focus where two-thirds or more of new jobs are created each year and will help small businesses manage their cash flow more effectively and encourage their long term sustainability. It is time for Congress to enact measures that help provide small businesses with a source of capital rather than draining them of the vital cash that they need. Such measures would not require government handouts or loans but, rather, would for the most part, merely entail postponing the taxation of business profits so long as those profits remained in the business to help insure its survival and growth.</span></span></p>

scholarly journals Segregation and Integration: A Study of the Behaviors of Investors with Extended Value Functions

2010 ◽  
Vol 2010 ◽  
pp. 1-8 ◽  
Author(s):  
Martin Egozcue ◽  
Wing-Keung Wong
Keyword(s):  
Prospect Theory ◽  
Mental Accounting ◽  
Analytical Theory ◽  
Value Functions ◽  
Multiple Outcomes ◽  
Extended Value ◽  
Hedonic Editing

This paper extends prospect theory, mental accounting, and the hedonic editing model by developing an analytical theory to explain the behavior of investors with extended value functions in segregating or integrating multiple outcomes when evaluating mental accounting.

The Effect of Hedge Fund Activism on Corporate Tax Avoidance

2012 ◽  
Vol 87 (5) ◽  
pp. 1493-1526 ◽  
Author(s):  
C. S. Agnes Cheng ◽  
Henry He Huang ◽  
Yinghua Li ◽  
Jason Stanfield
Keyword(s):  
Hedge Fund ◽  
Tax Avoidance ◽  
Securities And Exchange Commission ◽  
Data Availability ◽  
Corporate Tax ◽  
Track Record ◽  
Hedge Fund Activism ◽  
Tax Savings ◽  
Tax Changes ◽  
The Impact

ABSTRACT This paper examines the impact of hedge fund activism on corporate tax avoidance. We find that relative to matched control firms, businesses targeted by hedge fund activists exhibit lower tax avoidance levels prior to hedge fund intervention, but experience increases in tax avoidance after the intervention. Moreover, findings suggest that the increase in tax avoidance is greater when activists have a successful track record of implementing tax changes and possess tax interest or knowledge as indicated by their Securities and Exchange Commission (SEC) 13D filings. We also find that these greater tax savings do not appear to result from an increased use of high-risk and potentially illegal tax strategies, such as sheltering. Taken together, the results suggest that shareholder monitoring of firms, in the form of hedge fund activism, improves tax efficiency. JEL Classifications: G32; G34; H26. Data Availability: Data are available from sources identified in the text.

Political Scrutiny and Tax Law Compliance: Evidence from the American Jobs Creation Act of 2004

2014 ◽  
Vol 36 (2) ◽  
pp. 1-26 ◽  
Author(s):  
Jian Cao ◽  
Yunhao Chen ◽  
Roy Clemons ◽  
Michael R. Kinney
Keyword(s):  
House Of Representatives ◽  
Threshold Effect ◽  
The United States ◽  
Data Availability ◽  
Tax Law ◽  
Regulatory Enforcement ◽  
Marginal Tax Rate ◽  
Tax Rate ◽  
Political Cost ◽  
Tax Holiday

ABSTRACT: The American Jobs Creation Act of 2004 (the Act [U.S. House of Representatives 2004]) created a tax holiday encouraging firms to repatriate foreign earnings and invest that capital in the United States. However, the Act did not require a direct tracing of the spending of repatriated funds; accordingly, repatriating firms could ignore the investment prescriptions of the Act, since tax regulators were provided no legally viable basis to pursue violations of the spending requirements. We use this event to provide evidence on the effect of political scrutiny on firms' tax law compliance in a setting where regulatory enforcement plays essentially no role. Our findings suggest that repatriating firms facing greater levels of policymaker scrutiny, relative to other repatriating firms, exhibited greater compliance with the Act by increasing relative expenditures on permitted uses (R&D investment) and restraining expenditures on nonpermitted uses. We also find that the spending patterns are different only for the group of high-scrutiny firms (i.e., there is a threshold effect). Our estimates imply that the repatriation tax holiday induced, among such high-scrutiny firms alone, $0.41 of additional R&D spending per revenue dollar forgone by the Treasury under the Act. The evidence is generally consistent with the political cost hypothesis. Data Availability: The data used for this study are from the public sources identified in the text, with the exception of the marginal tax rate data provided by John Graham from Duke University.

On the role of similarity in mental accounting and hedonic editing.

2021 ◽  
Author(s):  
Ellen R. K. Evers ◽  
Alex Imas ◽  
Christy Kang
Keyword(s):  
Mental Accounting ◽  
Hedonic Editing
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