DP8425 The Tax Benefit of Income Smoothing
|Author(s):||Kristian Rydqvist, Steven Schwartz, Joshua Spizman|
|Publication Date:||June 2011|
|Keyword(s):||income tax history, private pensions, tax progressivity|
|JEL(s):||D91, G11, G18, G23, H24|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8425|
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.