Number: RL33482
Title: Saving Incentives: What May Work, What May Not
Authors: Thomas L. Hungerford, Government and Finance Division 
Abstract: The government offers tax incentives to individuals and families to save. The empirical evidence on the relationship of tax incentives to the saving rate mostly comes from examinations of traditional individual retirement accounts (IRAs) and 401(k) plans. The reported results are mixed, but generally indicate small effects. Be that as it may, the tax incentives tend to benefit higher-income individuals and families to a much greater extent than lower-income individuals and families. The primary reasons are (1) higher-income individuals are much more likely to save, and (2) higher-income individuals face higher marginal tax rates and benefit more from sheltering income from taxation.
Pages: 16
Date: September 27, 2007