Discussion Paper Details

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Title: The Tax Benefit of Income Smoothing

Author(s): Kristian Rydqvist, Steven Schwartz and Joshua Spizman

Publication Date: June 2011

Keyword(s): income tax history, private pensions and tax progressivity

Programme Area(s): Financial Economics

Abstract: A worker can contribute pre-tax dollars to a private pension plan. Under a progressive tax, this feature reduces income taxes. Ippolito (1986} argues that an individual in 1979 can reduce lifetime taxes by 20%. We re-examine his analysis using the complete time-series of US income tax history and find that the tax benefit of income smoothing is much smaller.

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Bibliographic Reference

Rydqvist, K, Schwartz, S and Spizman, J. 2011. 'The Tax Benefit of Income Smoothing'. London, Centre for Economic Policy Research.