Pension saving responses to anticipated tax changes: Evidence from monthly pension contribution records

TY - JOUR

T1 - Pension saving responses to anticipated tax changes

T2 - Evidence from monthly pension contribution records

AU - Kreiner, Claus Thustrup

AU - Leth-Petersen, Søren

AU - Skov, Peer

PY - 2017/1/1

Y1 - 2017/1/1

N2 - A Danish tax reform, passed in May 2009 and taking effect from the beginning of 2010, lowered the marginal tax rate on top bracket taxable income from 63% to 56%. Because contributions to pension accounts are tax deductible, the reform provided an incentive to increase pension contributions before the change in taxation. Using high frequency panel data, we document a temporary increase in pension contributions in the second half of 2009 in response to the anticipated change in taxation, and that this led to an increase in total savings in this period. The response is driven by less than 5% of those affected by the policy.

AB - A Danish tax reform, passed in May 2009 and taking effect from the beginning of 2010, lowered the marginal tax rate on top bracket taxable income from 63% to 56%. Because contributions to pension accounts are tax deductible, the reform provided an incentive to increase pension contributions before the change in taxation. Using high frequency panel data, we document a temporary increase in pension contributions in the second half of 2009 in response to the anticipated change in taxation, and that this led to an increase in total savings in this period. The response is driven by less than 5% of those affected by the policy.

KW - Faculty of Social Sciences

KW - H3

KW - Pension savings

KW - Tax incentives

KW - High frequency individual data

U2 - 10.1016/j.econlet.2016.11.011

DO - 10.1016/j.econlet.2016.11.011

M3 - Journal article

SN - 0165-1765

VL - 150

SP - 104

EP - 107

JO - Economics Letters

JF - Economics Letters

ER -