پاسخ مالیات دهندگان به مشوق های مالیاتی برای پس انداز بازنشستگی : مدارک و شواهد از شکاف اعتباری بهینه ساز

This paper uses the Saver's Credit to analyze taxpayers' understanding of, and responses to, tax incentives. The Saver's Credit is a tax credit designed to encourage retirement savings among low and middle income households; however, the credit's structure creates “notches”, or discontinuous jumps, within a household's budget constraint. These notches provide an incentive to manipulate adjusted gross income to fall just below the level where the credit decreases. I use Public Use Tax Files from the Internal Revenue Service to test whether taxpayers bunch their income at the notch created by the Saver's Credit. I find strong evidence that bunching occurred in response to the credit, which implies that taxpayers claiming the credit understood the incentives for bunching and indeed manipulated their incomes accordingly. I then exploit the discontinuity in credit rates to analyze the credit's impact on retirement contribution behavior using a regression discontinuity approach, and find that the credit failed to generate a statistically significant effect on the level of retirement contributions. These results imply that the Saver's Credit is more effective at providing transfers to low and middle income taxpayers than at increasing retirement contributions.

The Saver's Credit is one of many provisions in the US tax code intended to encourage individuals to save for retirement.1 The credit is structured so that the credit rate received for making contributions decreases as income increases to target low and middle income households. But the extent to which individuals respond to tax-based retirement incentives through changes in savings behavior is still an open question that has generated a large body of literature. This paper seeks to shed some new light on this question by analyzing changes in retirement contribution behavior in response to the Saver's Credit. When tax incentives are used to motivate a desired behavior, they often induce unintended responses in the process. The Saver's Credit is no exception. Although the credit is meant to subsidize retirement savings, its design also effectively subsidizes people to adjust their income. In particular the program allows for some taxpayers to lose as much as $600 in credit by reporting just one extra dollar of income. To provide the largest benefit for those with the lowest incomes, the amount of credit falls discontinuously as adjusted gross income (AGI) increases for a given amount of contributions. The resulting discontinuity, or notch, in an individual's budget constraint fosters a strong incentive to forego that extra dollar of income, either by altering labor supply or by altering reported income through evasion and/or avoidance. The presence of notches in the Saver's Credit incentivizes a behavioral response that is potentially costly to the program. For example, if individuals adjust their income to ensure eligibility, then the program could transfer income to taxpayers who would have otherwise been ineligible. An additional cost may also come from individuals who are eligible for the credit but adjust their income below the notch to receive a larger credit. In fact, households with larger contributions have a stronger incentive to lower their income and bunch at the notch since the credit rate applies to every dollar of contribution (up to a cap). This implies that any observed bunching could also have implications for contribution behavior. If bunching is found, then people who report incomes below the notch to receive a higher credit rate may also have higher marginal propensities to save. For instance, an individual that has a strong preference for saving and thus contributed the maximum amount also has an increased incentive to bunch as he/she has the most to gain from a higher credit rate. This makes disentangling the policy's influence on retirement contributions difficult. Thus, the magnitude of bunching found in the data is itself a parameter of interest. In particular, bunching has implications for both evaluating the total cost of the program that accounts for the unintended behavioral response as well as for evaluating the total benefit of the program that is measured in terms of changes in contribution behavior. This paper exploits the discontinuous structure of the Saver's Credit to investigate two questions: conditional on receiving the Saver's Credit, do households adjust their income in order to receive a higher credit rate? and: do households that receive a higher credit rate contribute more? To analyze how households respond to the Saver's Credit, I use the IRS Statistics of Income (SOI) Individual Public Use Tax Files spanning 2002 through 2006. The data contain information obtained directly from individual tax returns, which I use to estimate the effects of the Saver's Credit. I provide graphical evidence that documents the existence of bunching, which in turn has implications for estimating credit's impact on contribution behavior. The nature of the program makes the regression discontinuity research design seem ideal for studying the effect of the credit rate changes on savings contribution levels. However, the bunching complicates these estimates by potentially violating the identification assumption necessary for estimation. Despite this bunching, I am able to place bounds on the estimated treatment effect, which account for the possible bias. Ultimately I find that, conditional on taking the Saver's Credit, there is no statistically significant evidence that receiving a higher credit rate increased individual savings contributions for the marginal person. The overall impact of the Saver's Credit appears to be that taxpayers taking the Saver's Credit understand and respond to the incentive to bunch at the notch, but their savings contributions are unresponsive to a change in price.

The Saver's Credit is a policy designed to increase retirement savings among low and middle income households. In doing so, it also creates notches, or discontinuities, in a household's budget constraint. These notches give households an incentive to alter their reported income in order to receive a higher credit rate. In this paper, I show that people respond to incentives created by the Saver's Credit by bunching their adjusted gross income (AGI) below the notch. The evidence of bunching is strong and statistically significant. This is in contrast to past studies that show that there is no bunching when the incentives are small. As such, these findings with respect to the Saver's Credit contribute to the growing literature that argues that people will bunch, but incentives explored previously are too small to induce behavioral change. However, relative to the size of the program, the number of individuals who bunch is small and given that most do not save the maximum amount, the cost to the government is negligible. When measuring the effect of the Saver's Credit on retirement contribution behavior, I find a small increase in retirement contributions at the notch that is not statistically different from zero. This is consistent with past studies of low income savers. But this is somewhat surprising in the context of the Saver's Credit. Given that those with higher savings have the highest incentive to bunch, it's puzzling that, when they are included in the sample, the effect of price on savings is still relatively small and insignificant. These results may indicate that everyone who saves has the incentive to bunch, but not everyone has the ability to bunch. Those who do bunch may simply have a lower cost to altering their income, which may not be related to their savings preferences. If this is the case, then the OLS results capture the true effect, and people appear to be insensitive to the price of retirement contributions. Even in this case, the results are not conclusive, due to the large standard errors for the estimated treatment effect. To account for potentially biased results due to bunching, I bound the treatment effect, which produces a wide range of possible values for changes in contribution levels induced by an increased credit rate close to the notch including zero. Further exploration using a larger sample could help to more precisely identify the impact of the credit on contribution levels. Ultimately, this paper finds strong evidence that some households respond to incentives by bunching their incomes so as to receive the high credit rate, but they represent a relatively small fraction of all credits claimed. This paper also finds that households receiving a higher credit rate do not alter their savings behavior significantly relative to those that receive a lower credit rate. The implication of these findings is that the Saver's Credit induces a behavioral response among credit takers, but not the intended one. People who take the credit appear to understand the incentive to bunch and the incentive is large enough to do so, yet they are less sensitive to changes in the price of retirement contributions and fail to significantly increase their retirement contributions.