What happens when top income earners receive smaller subsidies for retirement savings?

Raj ChettyJohn N. FriedmanSoren Leth-PetersenTorben Heien Nielsen, and Tore Olsen ask this question and answer it here.

When individuals in the top income tax bracket received a smaller tax subsidy for retirement savings, they started saving less in retirement accounts….. but the same individuals increased the amount they were saving outside retirement accounts by almost exactly the same amount, leaving total savings essentially unchanged. We estimate that each $1 of government expenditure on the subsidy raised total savings by 1 cent.

 

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About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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