Tax Policy and the Economy
The NBER's Sixth Annual Conference on "Tax Policy and the Economy" was held in Washington on November 19. The program was organized by NBER Tax Program Director James M. Poterba of MIT. Five papers were discussed:
Steven F. Venti, NBER and Dartmouth College, and
David A. Wise, NBER and Harvard University,
"Government Policy and Personal Retirement Saving"
James M. Poterba, "Corporate Tax Revenues Since
the Tax Reform of 1986: What Explains the
Lawrence H. Goulder, NBER and Stanford University,
"The Distribution of Industry Burdens from Carbon
Joel B. Slemrod, NBER and University of Michigan,
"Taxation and Inequality: A Time Exposure
Alan J. Auerbach, NBER and University of
Pennsylvania; Jagadeesh Gokhale, Federal Reserve Bank
of Cleveland; and Laurence J. Kotlikoff, NBER and
Boston University, "Social Security and Medicare
Policy from the Perspective of Generational
Accounting" (NBER Working Paper No. 3915)
Venti and Wise review the data on IRAs and saving in new ways, and confirm their earlier findings that IRAs represent new saving. While IRA saving increases with age and income, it is fairly widespread: they find, for example, that more than half of IRAs in 1986 were held by families with incomes of $50,000 or less. Further, from 1980-9, saving outside of IRAs held fairly stable, as IRA saving first rose and then, after the 1986 tax changes, fell.
The Tax Reform Act of 1986 was projected to raise corporate taxes by more than $120 billion during 1986-91, but actual federal corporate tax receipts have fallen far short of those projections. Poterba finds that the most important factor contributing to this shortfall is lower-than-expected corporate profits. There are three principal causes of the underperformance of corporate profits: a lower-than-expected return on corporate capital; an increase in interest payments as a share of corporate operating income; and an increase in income to Subchapter S corporations subject to the individual income tax.
Goulder examines the effects of a U.S. carbon tax on U.S. industries. He considers alternative tax designs that differ according to the tax treatment of internationally traded goods and the use of tax revenues. …