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Article
The Effect of the Form of Tax Incentives on Individuals' Savings Decisions
Journal of Business and Behavioral Sciences
  • Julia M. Camp, Providence College
  • David S. Hulse, University of Kentucky
  • Cynthia Vines, University of Kentucky
Description

Congress and the media have both expressed concerns about Americans’ low savings rates. We address these concerns by investigating the extent to which the form of an investment’s tax preference affects individuals’ willingness to choose a tax-preferred vehicle over a less restrictive, but non-tax-preferred, investment. Specifically, we tested the extent to which subjects chose a traditional savings plan versus an investment resembling either a traditional IRA, Roth IRA, or government matching program. We find that subjects are not as sensitive to the form of the tax preference as they are to restrictions on their ability to withdraw funds. This suggests that, by reconsidering the extent to which individuals are forced to trade off tax savings and liquidity restrictions, Congress might more effectively promote individuals’ retirement savings.

Disciplines
Publisher
ASBBS
Publication Date
7-1-2008
Type
Article
Format
Text
None
.pdf
Language
English
Citation Information
Julia M. Camp, David S. Hulse and Cynthia Vines. "The Effect of the Form of Tax Incentives on Individuals' Savings Decisions" Journal of Business and Behavioral Sciences Vol. 18 Iss. 1 (2008) p. 123 - 147
Available at: http://works.bepress.com/julia_camp/12/