CHAP22Taxes on Savings 公共金融与公共政策课件
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Inflation and the Taxation of Savings
Inflation and Capital Taxation
nominal interest rate The interest rate earned by a given investment.
real interest rate The nominal interest rate minus the inflation rate; this measures an individual’s actual improvement in purchasing power due to savings.
Chapter 22 Taxes on Savings
22 . 1
Taxation and Savings—Theory and Evidence
Traditional Theory
Substitution and Income Effects of Taxes on Savings
The price change that results from the tax on savings interest will have two effects.
Taxation and Savings—Theory and Evidence
Traditional Theory
intertemporal choice The choice individuals make about how to allocate their consumption over time.
Before 1981, the tax brackets on which taxation is based were denominated in constant dollars that did not change with inflation.
This practice led to a phenomenon known as bracket creep, whereby individuals would see an increase in their tax rate despite no increase in their real income.
Real interest rate (r) = [1 + Nominal interest rate (i)] / [(1 + Inflation rate (p)] – 1
The problem is that taxes are levied on nominal, not real, interest earnings.
Public Finance and Public Policy, 2/e
Jonathan Gruber
Taxes on Savings
22
Prepared by: FERNANDO QUIJANO, YVONN QUIJANO, KYLE THIEL & APARNA SUBRAMANIAN
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
Chapter 22 Taxes on Savings
Taxes on Savings
Chapter 22
22.1 Taxation and Savings— Theory and Evidence 22.2 Alternative Models of Savings 22.3 Tax Incentives for Retirement Savings 22.4 Conclusion
8
Chapter 22 Taxes on Savings
22 . 1
Taxation and Savings—Theory and Evidence
Evidence: How Does the After-Tax Interest Rate Affect Savings?
Studying the connections between after-tax interest rates and savings is a difficult problem.
capital income taxation The taxes levied on the returns from savings.
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
2
22 . 1
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
9
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and the Taxation of Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
13
Chapter 22 Taxes on Savings
22 . 2
Alternative Models of Savings
Precautionary Savings Models
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
10
Chapter 22 Taxes on Savings
22 . 1
Taxation and Savings—Theory and Evidence
3
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
Leabharlann Baidu
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
savings The excess of current income over current consumption.
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
11
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and the Taxation of Savings
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and the Taxation of Savings
Inflation and Capital Taxation
We can define the relationship between the real and nominal interest rates as:
Although we can measure a given worker’s wage, it is hard to measure the appropriate interest rate for any given saver.
The interest that can be earned on any type of savings typically changes over time in the same way for all individuals, making it hard to find appropriate treatment and control groups for studying how savings respond to interest rate changes.
Traditional Theory
Substitution and Income Effects of Taxes on Savings
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
6
22 . 1
Taxation and Savings—Theory and Evidence
Traditional Theory
Substitution and Income Effects of Taxes on Savings
• There is also, however, an income effect of lower after-tax income.
When thinking about the income effect of changes in the after-tax interest rate on savings, it is helpful to reflect on the extreme case of a target level of consumption for retirement in period two. If Jack has a certain amount of consumption he wants in period two, then when the after-tax interest rate falls, he must save more and reduce CW in period one to achieve that target.
precautionary savings model A model of savings that accounts for the fact that individual savings serve, at least partly, to smooth consumption over future uncertainties.
• The lower after-tax interest rate will cause consumption in period one to rise through the substitution effect. This will in turn lead savings to fall.
Inflation and Capital Taxation
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
12
Chapter 22 Taxes on Savings
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
7
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and Capital Taxation
nominal interest rate The interest rate earned by a given investment.
real interest rate The nominal interest rate minus the inflation rate; this measures an individual’s actual improvement in purchasing power due to savings.
Chapter 22 Taxes on Savings
22 . 1
Taxation and Savings—Theory and Evidence
Traditional Theory
Substitution and Income Effects of Taxes on Savings
The price change that results from the tax on savings interest will have two effects.
Taxation and Savings—Theory and Evidence
Traditional Theory
intertemporal choice The choice individuals make about how to allocate their consumption over time.
Before 1981, the tax brackets on which taxation is based were denominated in constant dollars that did not change with inflation.
This practice led to a phenomenon known as bracket creep, whereby individuals would see an increase in their tax rate despite no increase in their real income.
Real interest rate (r) = [1 + Nominal interest rate (i)] / [(1 + Inflation rate (p)] – 1
The problem is that taxes are levied on nominal, not real, interest earnings.
Public Finance and Public Policy, 2/e
Jonathan Gruber
Taxes on Savings
22
Prepared by: FERNANDO QUIJANO, YVONN QUIJANO, KYLE THIEL & APARNA SUBRAMANIAN
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
Chapter 22 Taxes on Savings
Taxes on Savings
Chapter 22
22.1 Taxation and Savings— Theory and Evidence 22.2 Alternative Models of Savings 22.3 Tax Incentives for Retirement Savings 22.4 Conclusion
8
Chapter 22 Taxes on Savings
22 . 1
Taxation and Savings—Theory and Evidence
Evidence: How Does the After-Tax Interest Rate Affect Savings?
Studying the connections between after-tax interest rates and savings is a difficult problem.
capital income taxation The taxes levied on the returns from savings.
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
2
22 . 1
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
9
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and the Taxation of Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
13
Chapter 22 Taxes on Savings
22 . 2
Alternative Models of Savings
Precautionary Savings Models
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
10
Chapter 22 Taxes on Savings
22 . 1
Taxation and Savings—Theory and Evidence
3
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
Leabharlann Baidu
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
savings The excess of current income over current consumption.
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
11
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and the Taxation of Savings
22 . 1
Taxation and Savings—Theory and Evidence
Inflation and the Taxation of Savings
Inflation and Capital Taxation
We can define the relationship between the real and nominal interest rates as:
Although we can measure a given worker’s wage, it is hard to measure the appropriate interest rate for any given saver.
The interest that can be earned on any type of savings typically changes over time in the same way for all individuals, making it hard to find appropriate treatment and control groups for studying how savings respond to interest rate changes.
Traditional Theory
Substitution and Income Effects of Taxes on Savings
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
6
22 . 1
Taxation and Savings—Theory and Evidence
Traditional Theory
Substitution and Income Effects of Taxes on Savings
• There is also, however, an income effect of lower after-tax income.
When thinking about the income effect of changes in the after-tax interest rate on savings, it is helpful to reflect on the extreme case of a target level of consumption for retirement in period two. If Jack has a certain amount of consumption he wants in period two, then when the after-tax interest rate falls, he must save more and reduce CW in period one to achieve that target.
precautionary savings model A model of savings that accounts for the fact that individual savings serve, at least partly, to smooth consumption over future uncertainties.
• The lower after-tax interest rate will cause consumption in period one to rise through the substitution effect. This will in turn lead savings to fall.
Inflation and Capital Taxation
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
12
Chapter 22 Taxes on Savings
Chapter 22 Taxes on Savings
© 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber
7
22 . 1
Taxation and Savings—Theory and Evidence