TY  - JOUR
AU  - Engen,Eric M.
AU  - Gale,William G.
AU  - Scholz,John Karl
TI  - The Effects of Tax-Based Saving Incentives On Saving and Wealth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5759
PY  - 1996
Y2  - September 1996
UR  - http://www.nber.org/papers/w5759
L1  - http://www.nber.org/papers/w5759.pdf
N1  - Author contact info:
Eric M. Engen
American Enterprise Institute
1150 Seventeenth Street, NW
Washington, DC 20036
Tel: 202/862-5837
Fax: 202/862-7177
E-Mail: eric.m.engen@frb.gov

William Gale
Brookings Institution
1775 Massachusetts Avenue, NW
Washington, DC 20036
Tel: 202/797-6148
Fax: 202/797-6181
E-Mail: wgale@brookings.edu

John Karl Scholz
University of Wisconsin - Madison
Department of Economics
1180 Observatory Drive
Madison, WI 53706
Tel: 608/262-5380
Fax: 608/263-3876
E-Mail: jkscholz@facstaff.wisc.edu
AB  - This paper evaluates research examining the effects of tax-based saving incentives on private and national saving.  Several" factors make this an unusually difficult problem.  First, households that participate in, or are eligible for, saving incentive plans have systematically stronger tastes for saving than other households.  Second, the data indicate that households with saving incentives have taken on more debt than other households.  Third, significant changes in the 1980s in financial markets, pensions, social security, and nonfinancial assets interacted with the expansion of saving incentives.  Fourth, saving incentive accounts represent pre-tax balances, whereas conventional taxable accounts represent post-tax balances. Fifth, the fact that employer contributions to saving incentive plans are a part of total employee compensation is typically ignored. A major theme of this paper is that analyses that ignore these issues overstate the impact of saving incentives on saving. We show that accounting for these factors largely or completely eliminates the estimated positive impact of saving incentives on saving found in the literature.   Thus, we conclude that little if any of the overall contributions to existing saving incentives have raised private or national saving. *Portions of this article were published in the JEP, 1996, under title of "The Illusory Effects of Saving Incentives on Saving."
ER  -