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The Effects of Tax-Based Saving Incentives on Government Revenue and National Saving

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  • Feldstein, Martin

Abstract

This paper shows that previous analyses of IRA-type plans that seek to encourage household saving have miscalculated their effect on tax revenue and, therefore, on national saving by ignoring their favorable impact on corporate tax payments. Recognizing the important effects of IRA plans on corporate tax revenue changes previous conclusions about the revenue loss in a fundamental way. The revenue loss associated with IRAs either is much smaller than has generally been estimated or is actually a revenue gain. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 110 (1995)
Issue (Month): 2 (May)
Pages: 475-94

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Handle: RePEc:tpr:qjecon:v:110:y:1995:i:2:p:475-94

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References

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  1. Martin Feldstein & Philippe Bacchetta, 1989. "National Saving and International Investment," NBER Working Papers 3164, National Bureau of Economic Research, Inc.
  2. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  3. Gale, W.G. & Scholtz, J.K., 1992. "IRAs and household saving," Discussion Paper 1992-44, Tilburg University, Center for Economic Research.
  4. Martin Feldstein, 1983. "Behavioral Simulation Methods in Tax Policy Analysis," NBER Books, National Bureau of Economic Research, Inc, number feld83-2, July.
  5. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  6. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
  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. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
  9. Venti, Steven F & Wise, David A, 1986. "Tax-Deferred Accounts, Constrained Choice and Estimation of Individual Saving," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 579-601, August.
  10. Jane G. Gravelle, 1991. "Do Individual Retirement Accounts Increase Savings?," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 133-148, Spring.
  11. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2, July.
  12. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  13. David A. Wise, 1987. "Individual Retirement Accounts and Saving," NBER Chapters, in: Taxes and Capital Formation, pages 3-16 National Bureau of Economic Research, Inc.
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Cited by:
  1. R. Glenn Hubbard & Jonathan S. Skinner, 2009. "Assessing the Effectiveness of Saving Incentives," Books, American Enterprise Institute, number 24067, December.
  2. Philip R. Gerson, 1998. "The Impact of Fiscal Policy Variableson Output Growth," IMF Working Papers 98/1, International Monetary Fund.
  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. Feldstein, Martin, 1997. "How Big Should Government Be?," National Tax Journal, National Tax Association, vol. 50(2), pages 197-213, June.
  5. 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.
  6. Giuseppe Ruggieri & Maxime Fougère, 1997. "The effect of tax-based savings incentives on government revenue," Fiscal Studies, Institute for Fiscal Studies, vol. 18(2), pages 143-159, May.

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