Working Paper: NBER ID: w0487
Authors: Charles Becker; Don Fullerton
Abstract: We examine six alternative plans which might be discussed in an effort to increase consumer savings through the personal income tax system in the United States. These plans attempt to affect savings through an increase in the real rate of return either by direct tax cuts on savings or by indexing tax rates against inflation. The paper presents estimates of static and dynamic resource allocation effects for the six plans, and compares them to results obtained in earlier work on the impacts of more sweeping reforms. A medium-scale numerical general equilibrium model is used which integrates the U. S. tax system with consumer demand behavior by household and producer behavior by industry.
Keywords: income tax; savings; welfare gains; general equilibrium model
JEL Codes: H24; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax indexation (H29) | large welfare gains (D69) |
| tax indexation (H29) | increased savings (D14) |
| tax reforms (H29) | enhanced capital allocation efficiency (G31) |
| measures raising net-of-tax return to capital (F21) | varying degrees of success (Y40) |
| tax reforms (H29) | intertemporal efficiency gains (D15) |
| tax reforms (H29) | interindustry efficiency gains (F12) |
| intertemporal efficiency gains (D15) | interindustry efficiency gains (F12) |
| intertemporal welfare gains (D15) | regressive tax structure (H20) |
| extensive indexation (C43) | present value gains (G19) |