We investigate a game of delegated portfolio management such as hedge funds featuring risk-neutrality, hidden types, and hidden actions. We show that capital gain tax plays the decisive role in solving the incentive problem. We characterize the constrained optimal fee scheme and capital gain tax rate; the fee after taxation must be linear and affected by gains and losses in a low-powered and sy...

This paper surveys the literature on the implications of international capital mobility for national tax policies. Our main issue for consideration in this survey is whether taxation of income, specifically capital income will survive, how border crossing investment is taxed relative to domestic investment and whether welfare gains can be achieved through international tax coordination. We deve...

To encourage home ownership, the United States tax code treats the financing and sale of housing differently from most other goods. For example, the interest payments on your home mortgage and your property taxes are deduct-ible from your federal income taxes while the interest on your credit card bill for your vacation to Paris is not. Furthermore, the profit you make on the sale of your house...

Executive Summary This Report presents a detailed description of Treasury's dynamic analysis of the President's proposal to permanently extend the tax relief provisions enacted in 2001 and 2003 that are currently set to expire at the end of 2010. These enacted provisions include: • Lower tax rates on ordinary income; • Lower tax rates on dividends and capital gains; • A ten-percent individual i...

Executive Summary This Report presents a detailed description of Treasury's dynamic analysis of the President's proposal to permanently extend the tax relief provisions enacted in 2001 and 2003 that are currently set to expire at the end of 2010. These enacted provisions include: • Lower tax rates on ordinary income; • Lower tax rates on dividends and capital gains; • A ten-percent individual i...

Computing the optimal portfolio policy of an investor facing capital gains tax is a challenging problem: because the tax to be paid depends on the price at which the security was purchased (the tax basis), the optimal policy is path dependent and the size of the problem grows exponentially with the number of time periods. Dammon, Spatt, and Zhang (2001, 2002a,b), Garlappi, Naik, and Slive (2001...

This paper studies the impact of the preferential tax treatment of housing capital in a model economy that includes the main housing tax provisions currently in place in the U.S. and a minimum downpayment requirement upon purchasing non-divisible houses. Distortions arise because the tax code makes the return on housing capital larger than that on business capital. The wedge between the two rat...