Tax Reform and Target Savings / Andrew A. Samwick.

By:

Samwick, Andrew A

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w6640.Publication details: Cambridge, Mass. National Bureau of Economic Research 1998.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: If the United States switched to a broad-based consumption tax, than all forms of saving would enjoy the tax-preferred status reserved primarily for retirement saving vehicles under the current income tax system. Because pensions have other unique characteristics besides their tax advantage, current results on the effect of pensions on saving may provide an unreliable guide to the saving response to fundamental tax reform. The net effect of reform on saving depends critically on household motives for saving. This paper documents the considerable variation in the reasons why households save and presents a buffer stock model of saving that allows for both life cycle and target saving. To the extent that specific targets that are not currently tax-favored motivate the saving of households in their preretirement years, fundamental tax reform that results in the elimination of current pension plans will reduce saving.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w6640 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w6637 What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions /	nber w6638 Wages, Skills, and Technology in the United States and Canada /	nber w6639 On the Regulation of Fee Structures in Mutual Funds /	nber w6640 Tax Reform and Target Savings /	nber w6641 Social Security and Institutions for Intergenerational, Intragenerational, and International Risk Sharing /	nber w6642 Provide, Provide: The Economics of Aging /	nber w6643 Labor Market Integration Before the Civil War /	Next

July 1998.

If the United States switched to a broad-based consumption tax, than all forms of saving would enjoy the tax-preferred status reserved primarily for retirement saving vehicles under the current income tax system. Because pensions have other unique characteristics besides their tax advantage, current results on the effect of pensions on saving may provide an unreliable guide to the saving response to fundamental tax reform. The net effect of reform on saving depends critically on household motives for saving. This paper documents the considerable variation in the reasons why households save and presents a buffer stock model of saving that allows for both life cycle and target saving. To the extent that specific targets that are not currently tax-favored motivate the saving of households in their preretirement years, fundamental tax reform that results in the elimination of current pension plans will reduce saving.