The chapter states that the elderly population in the United States is growing more rapidly than the total population. In particular, the number capital gain. If he sells the asset, he “realizes”

the gains that have previously accrued. Under the U.S. income tax, realized capital gains are taxed, but accrued gains are not.

a. Explain how individuals’ behavior is affected by this rule.

b. Some economists believe that cuts in capital gains tax rates, especially temporary ones, can raise tax revenue. How might this be so?

c. Do you think it is a good rule to tax realized but not accrued capital gains? Why or why not?