sociated with capital gains taxation, how Under a Haig-Simons income tax, cap- these would be affected by a reduction in ital gains would be indexed for inflation capital gains tax rates, and the other poland taxed on accrual, with gains and losses icies available to lessen such distortions. treated symmetrically. The treatment of gains at death would lose significance because gains would already have been taxed 11. Recent Empirical Evidence as they accrued. Many of the distortions associated with the present system of The responsiveness of capital gains recapital gains taxation result from its de- alizations to tax rate changes has been the viation from the Haig-Simons approach. subject of spirited debate for over a deThese deviations may have historical ex- cade. A review of this literature in Auerplanations but their persistence is hard to bach (1988a) reached several conclusions: rationalize from an economic perspective. (1) Previous cross-section studies have, It is therefore disappointing and puzzling by their very nature, been unable