Taxation and Saving

Abstract

National saving consists of two components: private saving and public saving. Private saving takes place among 1 households (personal saving) and corporations (corporate saving). Public saving is the sum of budget surpluses (or deficits) for federal, state, and local governments. For the most part, this chapter concerns the impact of tax policy on the personal component of national saving. However, collateral effects on other components of national saving (e.g. changes in government revenue and shifts between corporate saving and private saving) are considered where relevant.

Human capital and optimal positive taxation of capital income

“…The sub-utility function v(c 1 n , c 2 n ) is homothetic and weakly separable from leisure n . With this particular utility function, the optimal capital income tax would be zero in the absence of human capital formation (see Bernheim 2002). This specification thus most clearly shows how endogenous human capital formation affects the optimal capital income tax.…”

“…5 In life-cycle models, Ordover and Phelps (1979) and Atkinson and Sandmo (1980) showed earlier that the optimal capital tax is zero if leisure is weakly separable from consumption. See also Bernheim (2002) for a more elaborate discussion. 6 In a similar vein, Grochulski and Piskorski (2005), da Costa and Maestri (2007), and Anderberg (2009) show that tax wedges on savings or wealth are optimal in risky environments with endogenous human capital formation.…”

Do Mobile Pensioners Threaten the Deferred Taxation of Savings?

“…Our contribution is related to the literature on optimal taxation of interest and saving (see the surveys by Bradford, 2000, Auerbach and Hines, 2002, Bernheim, 2002, Banks and Diamond, 2010. For the former, the standard result of Chamley (1986) and Judd (1985) states that interest should remain untaxed to avoid heavy distortions of relative prices over a long time horizon.…”

Can Capital Income Taxes Survive? And Should They?

“…Clearly it is hard to think of circumstances in which it would be optimal to impose an infinitely large tax distortion, and Chamley (1986) and Judd (1985) do indeed find that in the long run the capital income tax rate should be lowered to zero even if the alternative pubic revenue sources are also 13 Parts of this section draw on Sørensen (2005b). Bernheim (2002) and Auerbach (2006) also review some of the main arguments in the debate on the optimal taxation of capital income.…”