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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6640.
Length: Date of creation: Jul 1998 Date of revision: Handle: RePEc:nbr:nberwo:6640
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Find related papers by JEL classification: H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004.
"Do the Rich Save More?,"
Journal of Political Economy,
University of Chicago Press, vol. 112(2), pages 397-444, April.
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Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000.
"Do the Rich Save More?,"
NBER Working Papers
7906, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999.
"Consumption Over the Life Cycle,"
NBER Working Papers
7271, National Bureau of Economic Research, Inc.
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Other versions:
Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002.
"Consumption Over the Life Cycle,"
Econometrica,
Econometric Society, vol. 70(1), pages 47-89, January.
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