Tax Policy Center: Pensions, Tax Incentives for Saving
Tax Policy Center reports on: Pensions, Tax Incentives for Saving - The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is comprised of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government.

• KiwiSaver Evaluation Literature Review : Final Report to Inland Revenue
  KiwiSaver is a new saving incentive program in New Zealand that requires automatic enrollment of all new employees, with an option to opt out. KiwiSaver also subsidizes participation, but its subsidies are smaller than tax subsidies for saving in qualified retirement plans in the United States. Recent research shows that using automatic enrollment as a default rule substantially increases participation in retirement saving plans, but evidence on whether saving incentives plans increase net saving is mixed. KiwiSaver is the first large-scale test of whether default rules can be more effective than financial incentives in increasing retirement saving.
• Tax Policy: Facts and Figures : October 2006
  The early years of the 21st century have been marked by a major tax bill almost every year. This fact sheet looks at the impact of these laws on taxpayers, especially on who benefits and who doesnt, and discusses some unfinished business, including the future of the estate tax and the individual alternative minimum tax.
• Roth Conversions as Revenue Raisers: Smoke and Mirrors
  The Tax Increase Prevention and Reconciliation Act of 2005 will extend the low tax rates on capital gains and dividends through 2010, grant temporary relief from the individual alternative minimum tax through 2006, and extend several expiring business tax breaks. To prevent Senators from raising a parliamentary "point of order" that would kill the bill, it had to reduce federal tax revenues by no more than $70 billion. Meeting this budget target required the inclusion of several tax increase provisions in the package. One of the largest allows taxpayers to convert IRA balances into so-called Roth IRAs. The Joint Committee on Taxation reckons that this provision would raise $6.4 billion in revenues over the 10-year budget window. In fact, this provision would reduce federal revenues over the long term by much, much more than it raises in the short run: On balance, the provision would reduce net long-term federal revenues by $14 billion in present value.
• Making Maximum Use of Tax-Deferred Retirement Accounts
  Most workers do not contribute the maximum allowable amount to employer-sponsored tax-deferred retirement plans. The share of maximum contributors increased between 1990 and 2003, as did the percentage of participants who contribute the maximum or at least 10 percent of earnings. But virtually all the growth in maximum contributors came from groups with high shares of maximum contributors in 1990. Recent increases in contribution limits can be expected to reduce shares of maximum contributors, but raise relative shares of maximum contributors among high-earning and education groups. Increases in contribution limits do little to increase retirement preparedness among lower-income groups.
• Taxing Capital Income : Do We? Should We? Can We? Can We Not?
  The Urban-Brookings Tax Policy Center, American Tax Policy Institute, and Tax Analysts cosponsored a conference entitled Taxing Capital Income: Do we? Should we? Can we? (Can we not?). The one-day conference brought together leading economists, lawyers and accountants from across the political spectrum to discuss issues surrounding the choice of income or consumption as a tax base. Sessions addressed each question in the title. Douglas Holtz-Eakin, Director of the Congressional Budget Office, presented the luncheon address, and a wrap-up panel featured Henry Aaron, Leonard Burman and Dan Halperin. Drafts of the conference papers are available at the ATPI website, http://www.americantaxpolicyinstitute.org/.
• An Analysis of the Roth 401(k)
  This report describes the Roth 401(k) and discusses its potential effects. We find that the Roth 401(k) option will add complexity for employees and employers with little collateral social gain. The Roth 401(k) is unlikely to induce significant new private saving; almost all of the benefits are likely to accrue to high-income and wealthy taxpayers who are able to shift existing taxable assets into tax-favored savings plans. Moreover, the Roth 401(k) will increase the amount of resources that taxpayers can shelter and thus will likely have a negative effect on long-term federal budget revenue.
• Tax Law Changes Allow Employees to Contribute More to Tax-Deferred Accounts
  Since 2001, the dollar limit on employee contributions to employer-sponsored tax-deferred retirement accounts has increased from 32 percent of average earnings ($10,500) in 2001 to 39 percent of earnings in 2006 ($15,000). Employees over age 50 may make additional "catch-up" contributions, which will raise the total dollar limit for them to 52 percent of average earnings in 2006. But very few employees contribute the maximum allowable amount. Of those participating in plans, only 6 percent contributed the maximum amount in 2003. Additional increases in the contribution limit are likely to reduce the share of those who contribute the maximum.
• Social Security Reform: One More Time
  There has been much breast-beating lately about future entitlement spending burdens. The out-year liabilities of Social Security seem quite large$11 trillion in present-value terms. How can the nation ever deal with such major funding problems? While I have offered a specific plan in the past, most notably when I chaired one of the Social Security advisory councils ten years ago, in this paper I focus only on a broader strategy. While the present Social Security system is not by itself terribly far out of long-term actuarial balance, when combined with Medicare, the country is facing major problems in funding projected entitlement spending down the road.
• Penalties on IRAs and 401(k)s
  The leading policy goal for 401(k)-type plans and Individual Retirement Accounts is to help families accumulate wealth for retirement. Given this objective, policy-makers have created tax penalties for either withdrawing funds too quickly or too slowly. This Tax Fact explores these tax penalties, and shows that the share of all returns with a penalty has risen steadily over the past decade.
• Making the Tax System Work for Low-Income Savers : The Saver's Credit
  The federal tax system provides little incentive for participation in tax-preferred saving plans to households that most need to save more for retirement and whose contributions would most likely represent an actual increase in savings. By contrast, the tax code provides its strongest incentives to those who already are generally better prepared for retirement and who are more likely to use tax-preferred vehicles as a shelter than as an opportunity to increase overall saving. The saver's credit, helps correct this "upside-down" structure of tax incentives for retirement saving.
• Extension of Saving and Investment Incentives : Statement before the Subcommittee on Taxation and IRS Oversight of the Committee on Finance, United States Senate
  Congress is considering extending certain tax benefits for saving and investment that are slated to expire over the next several years, including the special rates on capital gains and dividends, the saver's credit, and the deduction for college tuition. This testimony addresses these provisions' effects on income distribution and saving and highlights the differences between the current special rates for dividends and capital gains and "corporate integration" proposals to end double taxation of corporate equity income and tax all capital income once.
• Improving Tax Incentives for Low-Income Savers : The Saver's Credit
  The federal tax system provides little incentive for participation