IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v35y2002i3p436-456.html
   My bibliography  Save this article

Tax–preferred savings accounts and marginal tax rates: evidence on RRSP participation

Author

Listed:
  • Kevin Milligan

Abstract

The effect of taxes on participation in Registered Retirement Savings Plans between 1982 and 1996 is studied. Interprovincial changes in the tax structure over this period provide identifying variation. Using this variation, I find that taxes influence households’ participation decisions, but more weakly than previously estimated. A 10 percentage point increase in the marginal tax rate is estimated to increase the probability of participation by 8 per cent. This explains only 5.1 per cent of the trend in participation. I also find suggestive evidence that the carryforward mechanism may be used as an instrument for tax base smoothing. JEL Classification: H24 Comptes d’épargne fiscalement privilégiés et taux marginaux d’imposition : résultats sur la participation aux régimes enregistrés d’épargne retraite (REER). Ce mémoire étudie les effets du régime d’imposition sur la participation aux régimes enregistrés d’épargne retraite (REER) entre 1982 et 1996. Les changements dans la structure d’imposition d’une province à l’autre au cours de la période fournissent un éventail de possibilités. Utilisant cet éventail, l’auteur découvre que le régime fiscal influence les décisions de participer des ménages, mais plus faiblement qu’on l’avait estimé précédemment. Un accroissement de 10 pour cent dans le taux marginal d’imposition accroît la probabilité de participation de 8 pour cent. Voilà qui explique seulement 5,1 pour cent de la tendance dans la participation. L’auteur découvre aussi que le mécanisme de report dans le temps de la portion inutilisée de la contribution aux REER peut être utilisé comme instrument de lissage de la base de revenus imposables.

Suggested Citation

  • Kevin Milligan, 2002. "Tax–preferred savings accounts and marginal tax rates: evidence on RRSP participation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(3), pages 436-456, August.
    • Handle: RePEc:wly:canjec:v:35:y:2002:i:3:p:436-456
    DOI: 10.1111/1540-5982.00139
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1540-5982.00139
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1540-5982.00139?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "The retirement incentive effects of Canada's Income Security programs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 261-290, May.
    2. Marianne Laurin & Derek Messacar & Pierre-Carl Michaud, 2021. "Financial Literacy and the Timing of Tax-Preferred Savings Account Withdrawals," CIRANO Working Papers 2021s-36, CIRANO.
    3. Adam M. Lavecchia, 2018. "Tax-Free Savings Accounts: Who uses them and how?," Working Papers 1802E, University of Ottawa, Department of Economics.
    4. Håkan Selin, 2012. "Marginal Tax Rates and Tax‐Favoured Pension Savings of the Self‐Employed: Evidence from Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 79-100, March.
    5. M. Martin Boyer & Philippe d’Astous & Pierre-Carl Michaud, 2019. "Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions?," Cahiers de recherche 1902, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    6. Bev Dahlby & Kevin Milligan, 2017. "From theory to practice: Canadian economists contributions to public finance," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1324-1347, December.
    7. Michael Baker & Jonathan Gruber & Kevin Milligan, 2007. "Simulating the Response to Reform of Canada," NBER Chapters, in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 83-118, National Bureau of Economic Research, Inc.
    8. Sule Alan & Kadir Atalay & Thomas F. Crossley, 2006. "Do the Rich Save More in Canada?," Quantitative Studies in Economics and Population Research Reports 406, McMaster University.
    9. Alan, Sule & Atalay, Kadir & Crossley, Thomas F. & Jeon, Sung-Hee, 2010. "New evidence on taxes and portfolio choice," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 813-823, December.
    10. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "Simulating the Response to Reform of Canada's Income Security Programs," NBER Working Papers 9455, National Bureau of Economic Research, Inc.
    11. Derek Messacar, 2018. "The Effects of Vesting and Locking in Pension Assets on Participation in Employer-Sponsored Pension Plans," Journal of Labor Research, Springer, vol. 39(2), pages 178-200, June.
    12. Athiphat Muthitacharoen & Trongwut Burong, 2022. "How do taxpayers respond to tax subsidy for long-term savings? Evidence from Thailand’s tax return data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 726-750, June.
    13. Engelhardt, Gary V. & Madrian, Brigitte C., 2004. "Employee Stock Purchase Plans," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 385-406, June.
    14. Sule Alan & Kadir Atalay & Thomas F. Crossley, 2015. "Do the Rich Save More? Evidence from Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(4), pages 739-758, December.
    15. Steeve Marchand, 2018. "Who Benefits from Tax-Preferred Savings Accounts?," Cahiers de recherche 1812, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    16. Juan Ayuso & Juan F. Jimeno & Ernesto Villanueva, 2019. "The effects of the introduction of tax incentives on retirement saving," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 211-249, November.
    17. Garcia-Medina Cecilia, 2016. "You, Me and the Mean: a Semiparametric Approach to the Redistributive Effects of Transfer Programs," Working Papers 2016-16, Banco de México.

    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

    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:wly:canjec:v:35:y:2002:i:3:p:436-456. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    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.