Daniel Hemel (NYU; Google Scholar) presents The Realization Doctrine and the Optimum Taxation of Capital Revenue (with Dhammika Dharmapala (Chicago; Google Scholar)) on the OMG Transatlantic Tax Talks Collection (OMG = Oxford-Michigan-MIT-Munich-Georgetown) in the present day: 

The belief requirement—a typical characteristic of real-world capital revenue tax programs—defers the taxation of positive aspects till the sale or different disposition of property. As applied, it typically imposes efficient capital revenue tax charges that decline over a taxpayer’s holding interval. Students of tax regulation and public finance have lengthy appreciated that the conclusion requirement generates a deferral profit and an related allocative inefficiency (the “lock-in impact”). Nevertheless, they’ve largely ignored the connection between realization and the optimum taxation of capital over the lifecycle. On this paper, we join the conclusion requirement to canonical leads to the optimum tax literature—specifically, the Atkinson-Stiglitz argument for the nontaxation of retirement financial savings and the Diamond-Mirrlees argument for top tax charges on financial savings withdrawn in midlife. First, we reconcile these leads to a easy three-period framework with stochastic ability shocks within the center interval, demonstrating that the optimum tax charge on financial savings withdrawn within the center interval is excessive whereas the optimum tax charge on financial savings withdrawn within the remaining interval is zero. We subsequent present how the conclusion requirement partially implements the optimum age-dependent capital revenue tax schedule.