Does It Pay to Save?

Studies | Taxes

No. 298
Friday, June 01, 2007
by Laurence J. Kotlikoff and David S. Rapson


Conclusion

“The U.S. tax and benefit system penalizes many savers.”

Saving is an important way for families to build their own safety net, finance their own retirement and become less dependent on government benefits.  Yet, the U.S. fiscal system provides most households with very strong reasons to limit their saving.  Furthermore, the effective marginal tax rates on saving have no particular rhyme or reason; they penalize young, single-parent, lower-income households that should have an incentive to save early, while giving incentives to older, higher-income households to save later.

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.


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