Behavioral Responses to an Annual Wealth Tax: Evidence from Sweden

From David Seim:

This paper addresses the behavioral effects of an annual wealth tax. I use Swedish tax records over the period 2000-2006 to estimate bunching at kink points in the pro- gressive tax schedule and find significant estimates of the implied elasticity of taxable net wealth in the range [0.1,0.3]. I decompose the effects into a reporting response and a real saving response. Using asset-level data on the portfolio of each resident in Sweden, I disentangle active changes (savings) in the portfolio from passive (capital gains and losses) movements. Exploiting features of the institutional setting, I find that an increase in the tax is likely to stimulate evasion rather than deter savings.

About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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