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Taxes and Pensions

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  • Peter A. Diamond

Abstract

Pension benefit rules depend on individual history far more than taxes do, and age plays a much larger role in pension determination than in tax determination. Apart from some simulation studies, theoretical studies of optimal tax design typically contain neither a mandatory pension system nor the behavioral dimensions that lie behind justifications commonly offered for mandatory pensions. Conversely, optimizing models of pension design typically do not include annual taxation of labor and capital incomes. After spelling out this contrast and reviewing (and rejecting) zero taxation of capital income based on the Atkinson-Stiglitz and Chamley-Judd results, this article raises the issue of tax-favored retirement savings, a topic where the two subjects come together.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2636.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2636

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Keywords: pension; income tax; social security;

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References

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Citations

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Cited by:
  1. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," Quantitative Macroeconomics Working Papers 20906, Hamburg University, Department of Economics.
  2. Kerstin Roeder, 2014. "Optimal taxes and pensions with myopic agents," Social Choice and Welfare, Springer, vol. 42(3), pages 597-618, March.
  3. Philippe Choné & Guy Laroque, 2014. "Income Tax and retirement Schemes," Working Papers 2014-07, Centre de Recherche en Economie et Statistique.
  4. Katarzyna Romaniuk, 2013. "Pension fund taxation and risk-taking: should we switch from the EET to the TEE regime?," Annals of Finance, Springer, vol. 9(4), pages 573-588, November.

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