(This abstract was borrowed from another version of this item.)"> (This abstract was borrowed from another version of this item.)">
Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/h/nbr/nberch/7709.html
   My bibliography  Save this book chapter

Alternative Tax Rules and Personal Saving Incentives: Microeconomic Data and Behavioral Simulations

In: Behavioral Simulation Methods in Tax Policy Analysis

Author

Listed:
  • Martin S. Feldstein
  • Daniel R. Feenberg
Abstract
This study examines the potential effects on personal savings of alternative types of tax rules. The analysis makes use of two extensive samples of information on individual savings and financial income: the 1972 Consumer Expenditure Survey and a stratified random sample of 26,000 individual tax returns for that year. The first type of tax rule that we consider would permit all tax-payers to make tax deductible contributions to individual savings accounts. The interest and dividends earned in these accounts would also accumulate untaxed. A potential problem with any such plan is that Individuals could in principle obtain tax deductions without doing any additional saving merely by transferring pre-existing assets into the special accounts. The evidence that we have examined indicates that this Is not likely to be important in practice since most taxpayers currently have little or no financial assets with which to make such transfers. For example, a plan permitting contributions of 10 percent of wages up to $2000 a year would exhaust all the pre-existing assets of 75 per-cent of households in just 2 years. Our evidence also shows that a ceiling on annual contributions of 10 percent of wages still leaves an increased saving incentive for more than 80 percent of households since fewer than 20 percent of households currently save as much as 10 percent a year. Specific simulations of a variety of such proposals show that even when income and substitution effects balance for a representative taxpayer (implying no change in his consumption) aggregate saving would rise considerably. The second type of tax rule that we examine would increase the current $200 interest and dividend exclusion. In 1972, among families with incomes of $20,000 to $30,000, 55 percent had more than $200 of interest and dividends; for those with incomes of at least $30,000, 82 percent had more than $200 of interest and dividends. For such families, the$200exclusion provides no incentive for additiona
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Martin S. Feldstein & Daniel R. Feenberg, 1983. "Alternative Tax Rules and Personal Saving Incentives: Microeconomic Data and Behavioral Simulations," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 173-210, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:7709
    as

    Download full text from publisher

    File URL: http://www.nber.org/chapters/c7709.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. M. S. Feldstein & S. C. Tsiang, 1968. "The Interest Rate, Taxation, and the Personal Savings Incentive," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 419-434.
    2. Alan J. Auerbach & Laurence J. Kotlikoff, 1983. "National Savings, Economic Welfare, and the Structure of Taxation," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 459-498, National Bureau of Economic Research, Inc.
    3. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    4. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 3-27, April.
    5. Mervyn A. King, 1980. "Savings and Taxation," NBER Working Papers 0428, National Bureau of Economic Research, Inc.
    6. Feldstein, Martin S, 1970. "Inflation, Specification Bias, and the Impact of Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 78(6), pages 1325-1339, Nov.-Dec..
    7. Charles E. McLure, Jr., 1980. "Taxes, Saving, and Welfare: Theory and Evidence," NBER Working Papers 0504, National Bureau of Economic Research, Inc.
    8. Lawrence H. Summers, 1978. "Tax Policy in a Life Cycle Model," NBER Working Papers 0302, National Bureau of Economic Research, Inc.
    9. Green, Jerry R & Sheshinski, Eytan, 1978. "Optimal Capital-Gains Taxation under Limited Information," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1143-1158, December.
    10. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
    11. Charles Becker & Don Fullerton, 1980. "Income Tax Incentives to Promote Saving," NBER Working Papers 0487, National Bureau of Economic Research, Inc.
    12. Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gale, William G & Scholz, John Karl, 1994. "IRAs and Household Saving," American Economic Review, American Economic Association, vol. 84(5), pages 1233-1260, December.
    2. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
    3. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Effects of Tax-Based Saving Incentives On Saving and Wealth," NBER Working Papers 5759, National Bureau of Economic Research, Inc.
    4. R. Glenn Hubbard & Jonathan S. Skinner, 1996. "Assessing the Effectiveness of Saving Incentives," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 73-90, Fall.
    5. Douglas, R & MacCulloch, Robert, 2016. "Welfare: Savings not Taxation," Working Papers 31890, Department of Economics, The University of Auckland.
    6. Figari, Francesco & Paulus, Alari & Sutherland, Holly, 2014. "Microsimulation and policy analysis," ISER Working Paper Series 2014-23, Institute for Social and Economic Research.
    7. Daniel Feenberg & Jonathan Skinner, 1989. "Sources of IRA Saving," NBER Chapters, in: Tax Policy and the Economy, Volume 3, pages 25-46, National Bureau of Economic Research, Inc.
    8. Joel Slemrod, 1985. "The Impact of Tax Reform on Households," NBER Working Papers 1765, National Bureau of Economic Research, Inc.
    9. Jonathan Skinner, 1991. "Individual Retirement Accounts: A Review of the Evidence," NBER Working Papers 3938, National Bureau of Economic Research, Inc.
    10. Martin Feldstein, 1982. "Private Pensions as Corporate Debt," NBER Chapters, in: The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, pages 75-90, National Bureau of Economic Research, Inc.
    11. Ayşe İmrohoroğlu & Selahattin İmrohoroğlu & Douglas H. Joines, 2003. "Time-Inconsistent Preferences and Social Security," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 745-784.
    12. Joel B. Slemrod, 1985. "The effect of tax simplification on individuals," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 29, pages 64-102.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fischer Black, 1981. "When Is a Positive Income Tax Optimal?," NBER Working Papers 0631, National Bureau of Economic Research, Inc.
    2. Feldstein, Martin, 1995. "Fiscal policies, capital formation, and capitalism," European Economic Review, Elsevier, vol. 39(3-4), pages 399-420, April.
    3. Hubbard, R. Glenn & Skinner, Jonathan & Zeldes, Stephen P., 1994. "The importance of precautionary motives in explaining individual and aggregate saving," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 59-125, June.
    4. Gian Maria Milesi-Ferretti & Nouriel Roubini, 1995. "Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis," Working Papers 95-18, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Robin Boadway & David Wildasin, 1994. "Taxation and savings: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 19-63, August.
    6. Alicia H. Munnell, 1992. "Taxation of capital income in a global economy: an overview," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 33-52.
    7. Feldstein, Martin, 1980. "Tax Rules and the Mismanagment of Monetary Policy," American Economic Review, American Economic Association, vol. 70(2), pages 182-186, May.
    8. Charles E. McLure, Jr., 1981. "The Elusive Incidence of the Corporate Income Tax: The State Case," NBER Working Papers 0616, National Bureau of Economic Research, Inc.
    9. Shlomo Yitzhaki, 1983. "On Two Proposals to Promote Saving," Public Finance Review, , vol. 11(3), pages 299-319, July.
    10. Lawrence H. Summers, 1978. "Tax Policy in a Life Cycle Model," NBER Working Papers 0302, National Bureau of Economic Research, Inc.
    11. Mervyn A. King, 1980. "Savings and Taxation," NBER Working Papers 0428, National Bureau of Economic Research, Inc.
    12. Kotlikoff, Laurence J, 1984. "Taxation and Savings: A Neoclassical Perspective," Journal of Economic Literature, American Economic Association, vol. 22(4), pages 1576-1629, December.
    13. Charles Becker & Don Fullerton, 1980. "Income Tax Incentives to Promote Saving," NBER Working Papers 0487, National Bureau of Economic Research, Inc.
    14. Alan J. Auerbach & Laurence J. Kotlikoff, 1983. "National Savings, Economic Welfare, and the Structure of Taxation," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 459-498, National Bureau of Economic Research, Inc.
    15. Ibrahim A. Elbadawi & Francis M. Mwega, 2000. "Can Africa's Saving Collapse Be Reversed?," The World Bank Economic Review, World Bank, vol. 14(3), pages 415-443, September.
    16. repec:idb:brikps:377 is not listed on IDEAS
    17. David G. Hartman, 1985. "On the Optimal Taxation of Capital Income in the Open Economy," NBER Working Papers 1550, National Bureau of Economic Research, Inc.
    18. Michael J. Boskin & Laurence J. Kotlikoff, 1985. "Pubic Debt and U.S. Saving: A New Test of the Neutrality Hypothesis," NBER Working Papers 1646, National Bureau of Economic Research, Inc.
    19. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
    20. Joel Slemrod, 1985. "The Impact of Tax Reform on Households," NBER Working Papers 1765, National Bureau of Economic Research, Inc.
    21. Auerbach, Alan J., 1979. "Share valuation and corporate equity policy," Journal of Public Economics, Elsevier, vol. 11(3), pages 291-305, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:7709. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.