The Shrinking Tax Preference for Pension Savings: An Analysis of Income Tax Changes, 1985-2007

Research Report

The Shrinking Tax Preference for Pension Savings: An Analysis of Income Tax Changes, 1985-2007

Abstract

The value of the tax preference for pensions depends on the marginal tax schedule and on the tax treatment of income from assets held outside a pension account. We find that changes in U.S. tax law, especially the reduction in tax rates on capital gains and dividends, but also the decline in marginal tax rates, have led to sizeable changes in the value of the pension tax preference. On balance the value of the pension tax preference to worker-savers is modestly lower than it was in the mid-1980s and substantially lower than it was in the late 1980s.

Research Area: 

Cross-Center Initiative

Cross-Center Initiative: 
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