First Name:
Alex
Last Name:
Helms
Major Department:
Accounting
Thesis Director:
Mary Ann Hofmann
Date of Thesis:
May 2013
This paper seeks to further the understanding of how capital gains tax policy can affect the realization of capital gains and have an impact on investment in the economy. While there has been a substantial amount of research regarding capital gains policy, there has not been any research that seeks to analyze how an individual will react in an investment scenario where there is news of a new piece of tax legislation that will change the rate at which capital gains are taxed. In this study, we developed two experiments that place individuals in an investment scenario and ask them to make an investment decision based on the facts given in the scenario. For each scenario, all facts are the same except the capital gains rate is increasing in one and decreasing in the other. We were able to conclude that participants were affected by the capital gains legislation introduced in the two scenarios but are unable to attribute this effect directly to either the existence or the change in the capital gains tax rate.