Personal Holding Companies, Tax Progressivity, and Inequality | NBER
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Personal Holding Companies, Tax Progressivity, and Inequality
Marius A. K. Ring,
David G. Seim
& Gabriel Zucman
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Working Paper 35534
DOI 10.3386/w35534
Issue Date July 2026
Tax avoidance through personal holding companies has long been viewed as a key challenge for progressive income taxation. We exploit twenty years of administrative micro-data linking firms to owners in Sweden and Norway to analyze how the use of personal holding companies varies across the income distribution and to quantify its implications in a quasi-experimental setting. About half of the income of the top 0.1% is retained in personal holding companies defined, as in US tax law, as firms for which five or fewer owners own more than 50% of the stock and that derive more than 60% of income from investment income. Event studies of shocks to operational firms’ value-added show that holding companies shield around half of dividend distributions from individual income taxation. Profits tend to remain in holding companies for long periods of time, with cumulative payout rates of 15%–20% over two decades for the highest income groups. Wealth taxes do not provide an effective backstop due to the low valuation (or exemption) of shares in private businesses. As a result, effective tax rates, all taxes included, fall from about 50% for the upper middle class to about 15%–20% among the highest-net-worth individuals. Accounting for income in holding companies erases half of the difference in the 1980–2020 rise of the top 1% fiscal income share between Nordic countries and the United States, where rules penalizing the use of holding companies have been in place since the 1930s.
Acknowledgements and Disclosures
We thank Laurent Bach, Antoine Bozio, Camille Landais, Clément Malgouyres, and numerous seminar and conference participants for helpful discussions and comments. We thank Quan Cheng Xie and Mohsen Rezazade Mirab Mohammad for outstanding research assistance. Funding from the Stone Foundation and the European Research Council is gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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Marius A. K. Ring, David G. Seim, and Gabriel Zucman, "Personal Holding Companies, Tax Progressivity, and Inequality," NBER Working Paper 35534 (2026), https://doi.org/10.3386/w35534.
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