Discusses the revenue consequences of cutting tax rates on capital gains. Develops a model of taxpayer responses to transitory (not permanent) tax changes and tests its implications using data on asset transactions in the Sales of Capital Assets panel compiled by the IRS. Finds evidence that...

Using data from several sources, we show that the vast majority of corporate income is not double-taxed in the United States. We estimate that the taxable share of U.S. corporate equity has declined dramatically in recent years, from over 80 percent in 1965 to about 30 percent at present. We...