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Macroeconomic Effects of Social Security and Tax Reform in the United States

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Author Info

  • Tamim Bayoumi
  • Dennis P. J. Botman
  • Manmohan S. Kumar

Abstract

We use the IMF''s Global Fiscal Model to evaluate recent proposals to reform social security and the tax system in the United States. Introducing personal retirement accounts is unlikely to yield significant macroeconomic benefits unless it spurs additional fiscal consolidation to prevent a large increase in government debt. Similar benefits are obtained if the social security surplus is placed in a lockbox while maintaining the same debt target. Lowering the taxation of investment income is beneficial, but only if the reform is revenue neutral. Debtneutral social security and tax reform in the United States has large positive effects on the rest of the world.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/208.

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Length: 22
Date of creation: 01 Nov 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/208

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Keywords: Fiscal consolidation; Fiscal management; Tax reforms; Economic models; income taxes; tax reform; taxation; corporate income taxes; fiscal policy; personal income taxes; double taxation; tax base; government spending; personal income tax; tax system; fiscal policies; fiscal discipline; fiscal model; capital accumulation; taxation of capital income; tax measures; tax rates; fiscal reform; tax cuts; government budget constraint; government budget; fiscal transparency; taxation of investment; aggregate demand; fiscal position; fiscal issues; budget constraint; corporate income tax; tax reductions; income tax rates; tax deductible; fiscal variables; fiscal adjustment; average tax rate; wage taxes; public expenditures; fiscal affairs; public debt; deficit reduction; capital stock; fiscal structure; expansionary fiscal; government revenue; fiscal affairs department; labor taxes; fiscal shocks; optimal taxation;

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References

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  1. Ioan Carabenciov & Charles Freedman & Roberto Garcia-Saltos & Douglas Laxton & Ondra Kamenik & Petar Manchev, 2013. "Gpm6," IMF Working Papers 13/87, International Monetary Fund.
    • Tamim Bayoumi & Hamid Faruqee & Douglas Laxton & Philippe D Karam & Alessandro Rebucci & Jaewoo Lee & Ben Hunt & Ivan Tchakarov, 2004. "Gem," IMF Occasional Papers 239, International Monetary Fund.
  2. Christopher Erceg & Luca Guerrieri, 2005. "Expansionary Fiscal Shocks and the Trade Deficit," Computing in Economics and Finance 2005 128, Society for Computational Economics.
  3. Douglas Laxton & Paolo Pesenti, 2003. "Monetary Rules for Small, Open, Emerging Economies," NBER Working Papers 9568, National Bureau of Economic Research, Inc.
  4. Brooks,Robin & Razin,Assaf (ed.), 2005. "Social Security Reform," Cambridge Books, Cambridge University Press, number 9780521844956, April.
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Cited by:
  1. Botman, Dennis & Edison, Hali & N'Diaye, Papa, 2009. "Strategies for fiscal consolidation in Japan," Japan and the World Economy, Elsevier, vol. 21(2), pages 151-160, March.
  2. Dennis Botman & Philippe Karam & Douglas Laxton, 2008. "Les modèles DSGE au FMI : applications et développements récents," Économie et Prévision, Programme National Persée, vol. 183(2), pages 175-198.

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