Income and saving responses to tax incentives for private retirement savings

Marc Chan, Todd Morris, Cain Polidano () and Ha Vu

Journal of Public Economics, 2022, vol. 206, issue C

Abstract: Many governments offer tax concessions for retirement contributions. In this paper, we show that income responses are crucial for understanding their effectiveness in raising retirement savings and alleviating the fiscal pressures of population aging. Using tax register data, we study large changes in caps on tax-favored contributions to individual retirement accounts in Australia. We find that higher caps increase retirement contributions considerably, with around two-thirds of this response financed by increases in earned income. The resulting gain in income tax revenue offsets the fiscal loss from tax concessions, highlighting the importance of taking income and labor supply responses into account.

Keywords: Tax concessions; Retirement saving; Taxable income; Labor supply (search for similar items in EconPapers)
JEL-codes: H2 H3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:206:y:2022:i:c:s0047272721002346

DOI: 10.1016/j.jpubeco.2021.104598

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