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Taxes and Pensions

  • Peter Diamond

    ()

    (MIT Department of Economics, 50 Memorial Drive, Building E52, Room 344, Cambridge, MA 02142, USA)

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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File URL: http://dx.doi.org/10.4284/sej.2009.76.1.2
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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2009)
Issue (Month): 1 (July)
Pages: 2-15

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Handle: RePEc:sej:ancoec:v:76:1:y:2009:p:2-15
Contact details of provider: Web page: http://www.southerneconomic.org/

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  1. Jean-Marie Lozachmeur, 2006. "Optimal Age-Specific Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(4), pages 697-711, October.
  2. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
  3. Konishi, Hideo, 1995. "A Pareto-improving commodity tax reform under a smooth nonlinear income tax," Journal of Public Economics, Elsevier, vol. 56(3), pages 413-446, March.
  4. Mikhail Golosov & Narayana Kocherlakota & Aleh Tsyvinski, 2002. "Optimal Indirect and Capital Taxation," Levine's Working Paper Archive 391749000000000449, David K. Levine.
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  6. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2009. "The Importance of Default Options for Retirement Saving Outcomes: Evidence from the United States," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 167-195 National Bureau of Economic Research, Inc.
  7. Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February.
  8. Narayana Kocherlakota, 2004. "Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation," Levine's Bibliography 122247000000000729, UCLA Department of Economics.
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  10. Cremer, Helmuth & Pestieau, Pierre & Rochet, Jean-Charles, 2003. "Capital income taxation when inherited wealth is not observable," Journal of Public Economics, Elsevier, vol. 87(11), pages 2475-2490, October.
  11. Andres Erosa & Martin Gervais, 2000. "Optimal taxation in life-cycle economies," Working Paper 00-02, Federal Reserve Bank of Richmond.
  12. BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, 1997. "Redistribution with unobservable bequests: a case for taxing capital income," CORE Discussion Papers 1997070, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Gervais, Martin, 2009. "On the optimality of age-dependent taxes and the progressive U.S. tax system," Discussion Paper Series In Economics And Econometrics 0905, Economics Division, School of Social Sciences, University of Southampton.
  14. Sanna Tenhunen & Matti Tuomala, 2007. "On optimal lifetime redistribution policy," Working Papers 0750, University of Tampere, School of Management, Economics.
  15. Mikhail Golosov & Aleh Tsyvinski, 2006. "Designing Optimal Disability Insurance: A Case for Asset Testing," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 257-279, April.
  16. Vidar Christiansen & Matti Tuomala, 2008. "On taxing capital income with income shifting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 527-545, August.
  17. S. Rao Aiyagari, 1994. "Optimal capital income taxation with incomplete markets, borrowing constraints, and constant discounting," Working Papers 508, Federal Reserve Bank of Minneapolis.
  18. Peter A.Diamond, 1973. "Inflation and the Comprehensive Tax Base," Working papers 98, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Blomquist, Sören & Micheletto, Luca, 2003. "Age Related Optimal Income Taxation," Working Paper Series 2003:7, Uppsala University, Department of Economics.
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  28. repec:oup:restud:v:78:y::i:4:p:1490-1518 is not listed on IDEAS
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  30. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  31. Saez, Emmanuel, 2002. "The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes," Journal of Public Economics, Elsevier, vol. 83(2), pages 217-230, February.
  32. Kaplow, Louis, 2006. "On the undesirability of commodity taxation even when income taxation is not optimal," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1235-1250, August.
  33. R. Glenn Hubbard & Kenneth L. Judd, 1986. "Liquidity Constraints, Fiscal Policy, and Consumption," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 1-60.
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  35. Chamley, Christophe, 2001. "Capital income taxation, wealth distribution and borrowing constraints," Journal of Public Economics, Elsevier, vol. 79(1), pages 55-69, January.
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