THE EFFECTS OF TAX-BASED SAVING INCENTIVES ON GOVERNMENT REVENUE AND NATIONAL SAVING

This paper shows that previous analyses of IRA-type plans that seek to encourage household saving have miscalculated their effect on tax rev enue and therefore on national saving by ignoring their favorable impa ct on corporate tax payments. Recognizing the important effects of IRA plans on corporate tax revenue changes previous conclusions about the revenue loss in a fundamental way. The revenue loss associated with I RAs either is much smaller than has generally been estimated or is act ually a revenue gain.