Tax Policy and Saving

Research Report

Tax Policy and Saving

May 8, 2006

Abstract

Economists have provided valuable insights into human behavior, and as a result, are pretty good at policy analysis. They are not very good at explaining savings, however. Perhaps that is because there is much that is irrational in saving behavior and economists are not good at irrationality. Whether irrational or not, we know that within each income group there are inveterate savers and inveterate spenders, and that may be important in trying to figure out how tax policy affects saving behavior.

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