The Impact of Tax Incentive Structure On Taxpayers’ Retirement Savings Decisions

2021 ◽  
Author(s):  
Andrew D. Cuccia ◽  
Marcus M. Doxey ◽  
Shane R. Stinson
Keyword(s):  
Retirement Savings ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Incentive Structure ◽  
Tax Rate ◽  
Tax Incentive ◽  
Incentive Structures ◽  
Tax Returns ◽  
Relative Attractiveness ◽  
The Impact

We investigate whether and how the structure of retirement savings incentives influences their relative attractiveness to taxpayers, independent of their effect on after-tax returns. To that end, we examine taxpayers’ preferences between defined contribution retirement plans with back-loaded (i.e., Roth) and front-loaded (i.e., traditional) tax incentives. In three experiments, we find limited evidence that individuals appropriately weight temporal tax rate changes, the primary factor differentiating after-tax returns across incentive structures, in their plan preferences. In contrast, we find consistent evidence that the incentive structure’s relation to taxpayers’ broader attitudes and preferences significantly impacts plan preferences. Overall, we find evidence that generally held attitudes and preferences lead to a systematic preference for back-loaded retirement plans even in situations in which taxpayers know that a back-loaded plan is economically dominated by a front-loaded plan. The results have implications for policymakers and others considering how best to encourage retirement savings.

scholarly journals A Randomized Trial of the Impact of Survey Design Characteristics on Response Rates Among Nursing Home Providers

2011 ◽  
Vol 34 (4) ◽  
pp. 464-486 ◽  
Author(s):  
Melissa Clark ◽  
Michelle Rogers ◽  
Andrew Foster ◽  
Faye Dvorchak ◽  
Frances Saadeh ◽  
...  
Keyword(s):  
Survey Design ◽  
Response Rates ◽  
Incentive Structure ◽  
Term Care ◽  
Incentive Structures ◽  
Design Characteristics ◽  
C 30 ◽  
The Individual ◽  
Director Of Nursing ◽  
The Impact

An experiment was conducted to maximize participation of both the Director of Nursing (DoN) and the Administrator (ADMIN) in long-term care facilities. Providers in each of the 224 randomly selected facilities were randomly assigned to 1 of 16 conditions based on the combination of data collection mode (web vs. mail), questionnaire length (short vs. long), and incentive structure. Incentive structures were determined by amount compensated if the individual completed and an additional amount per individual if the pair completed (a) $30 individual/$5 pair/$35 total; (b) $10 individual/$25 pair/$35 total; (c) $30 individual/$20 pair/$50 total; and (d) $10 individual/$40 pair/$50 total. Overall, 47.4% of eligible respondents participated; both respondents participated in 29.3% of facilities. In multivariable analyses, there were no differences in the likelihood of both respondents participating by mode, questionnaire length, or incentive structure. Providing incentives contingent on participation by both providers of a facility was an ineffective strategy for significantly increasing response rates.

scholarly journals Use of Advisors and Retirement Plan Performance

2020 ◽  
Vol 31 (2) ◽  
pp. 342-356
Author(s):  
Rui Yao ◽  
Weipeng Wu ◽  
Cody Mendenhall
Keyword(s):  
Portfolio Allocation ◽  
Objective Measures ◽  
Retirement Savings ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Cross Sectional ◽  
Retirement Plan ◽  
Research Gap

As defined contribution (DC) plans become more popular than defined benefit (DB) plans, American workers are increasingly responsible for their retirement savings. Because retirement plan participants' portfolio allocation is constrained by the available funds in the plan, the construction of a plan's investment menu has become extremely important. No research has evaluated fund selection in retirement plans or compared plans involving an advisor with self-directed plans. To fill this research gap, this study employs cross-sectional, nationwide data that include 5,570 retirement plans with 100 or more participants in 2013, 2014 and 2015. Results show that in most cases, using advisors is not related to plan performance. Plan sponsors should require advisors to periodically evaluate the performance of plans under their management using objective measures.

The impact of R&D tax incentive programs on the performance of innovative companies

foresight ◽  
2019 ◽  
Vol 21 (5) ◽  
pp. 545-562
Author(s):  
Elena Makeeva ◽  
Ilona Murashkina ◽  
Irina Mikhaleva
Keyword(s):  
Explanatory Variable ◽  
Corporate Taxation ◽  
Corporate Tax ◽  
Data Set ◽  
Content Type ◽  
Tax Rate ◽  
Incentive Programs ◽  
Incentive Program ◽  
Tax Incentive ◽  
The Impact

Purpose This study aims to explore the influence of corporate taxation on the performance of innovative companies under various research and development (R&D) tax incentive programs. Design/methodology/approach The empirical model is based on the data of 520 companies for period 2007-2016. This model includes return on assets as the main proxy for performance and effective tax rate as a main explanatory variable. Controlling for other known determinants, the authors divide the sample into the subsamples to control for the various R&D tax incentive programs. The fact that the model includes the lagged explanatory variable of performance the Blundell –Bond model was applied. Findings The authors found evidence that corporate taxation has a significant impact on performance, but the direction could be ambiguous. Impact of the corporate tax rate on performance in general sample is significantly negative, which is consistent with results obtained by authors for the non-innovative companies. However, for further examination, the authors use subsamples of companies with different R&D tax incentive programs. The effect of corporate tax becomes positive under the patent box program only. Moreover, under various R&D tax incentive program, the impact of main control variables has changed. Therefore, the authors conclude that not only corporate taxation but also R&D tax incentive programs significantly influence the performance of innovative companies. Research limitations/implications The data are limited due to fragmented information disclosure about the R&D tax incentive program used. Thus, a different data set might reveal new information and correlation between variable on the same topic. Moreover, the authors do not cover all R&D tax incentive programs, which are specified for companies and countries. However, the study fills the gap between corporate taxation, performance and innovative companies. As the significant result was found the further research is important. The study contributes not only in the field of research but also a practical one. The choice of R&D tax incentive program influences main indicators of companies’ performance so it may change the behavior of the investors and decision-making managers of the companies. Originality/value Given the increasing interest in the topic of innovative companies, this study fills the gap between corporate taxation in innovative companies and performance. In addition, the importance of R&D tax incentive programs as a feature of innovative companies was found.

scholarly journals The JGTRRAs Tax Rate Cuts: A Financial Incentive For Tax Planning By Owner/Executives Of Small To Medium Closely Held C-Corporations

2011 ◽  
Vol 5 (5) ◽  
Author(s):  
Gregg S. Woodruff
Keyword(s):  
Executive Compensation ◽  
Financial Incentive ◽  
Medium Size ◽  
Computational Formula ◽  
Retirement Plans ◽  
Ceteris Paribus ◽  
Tax Base ◽  
Tax Rate ◽  
Tax Relief ◽  
The Impact

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), creates a financial incentive for the owner/executives of small to medium size closely held corporations to deviate from the Pre-JGTRRA 2002 historical allocations of average taxable corporate income before owner/executive compensation to taxable salary and qualifying dividends.  For purposes of comparison, this paper summarizes the 2002 tax year average taxable corporate incomes before owner/executive compensation for small to medium size closely held corporations, the 2002 average allocations to taxable salary and bonuses or qualifying dividend income and the tax consequences of those allocations.  The 2002 tax year average allocations and tax consequences calculated using the JGTRRA’s tax bases and rate parameters are compared with the results of an iterative numerical search procedure that incorporates the JGTRRA’s tax base and tax rate parameters to mathematically estimate tax-minimizing allocations to owner/executive salary and bonuses versus dividends.  Comparisons of the estimated tax-minimizing allocations’ 2004 (JGTTRA) tax consequences with the 2002 (using JGTTRA) tax year’s average historical allocations’ tax consequences indicate that the JGTRRA has created a financial incentive to deviate from the historical allocations to salary and bonuses versus dividends of the taxable corporate income before owner/executive compensation.  One caveat or constraint to adjusting historical allocations to tax-minimizing allocations would be that the Internal Revenue Service might challenge adjusted allocations as unreasonably low salary compensation that would deprive the treasury of Social Security and Medicare taxes.  Another constraint is that the iterative computations are ceteris paribus for those factors not included in the computational formula.  Specifically this paper does not model for tax deferred contributions to retirement plans and does not model for the impact of the American Jobs Creation Act of 2004 and the deduction for qualified U.S. production activities.

Improving the Retirement Prospects of Lower-Wage Workers in a Defined-Contribution World

2007 ◽  
Vol 88 (3) ◽  
pp. 453-462 ◽  
Author(s):  
Judith G. Gonyea
Keyword(s):  
Financial Literacy ◽  
Pension Plans ◽  
Individual Responsibility ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Savings Behavior ◽  
Service Workers ◽  
Retirement Security ◽  
Lower Wage ◽  
The Impact

Lower-wage workers have always faced challenges in saving for their retirement years. As U.S. businesses increasingly adopt defined-contribution pension plans and emphasize individual responsibility and choice, what is the impact of this shift on the working poor? Lack of pension coverage is a significant concern because Social Security alone will not assure a comfortable retirement for lower-income workers. Our survey of more than 300 lower-wage service workers revealed that significant predictors of retirement savings behavior included greater financial literacy as well as greater job stability, stronger workforce attachment, and higher income. Employer-sponsored pension plans were the most frequently used savings option. Based on the findings, we explore the potential impacts of the Pension Protection Act of 2006 (PPA) on lower-wage workers' retirement security and propose policy steps to reduce the risk of poverty being recycled into postretirement years.

A Theoretical Look at the Impact of Incentives on Design Problem Effort Provision

2018 ◽  
Author(s):  
Sean D. Vermillion ◽  
Richard J. Malak
Keyword(s):  
Analytical Model ◽  
Design Problem ◽  
Figure Of Merit ◽  
Design Solution ◽  
Parameter Study ◽  
Incentive Structure ◽  
Design Problems ◽  
Incentive Structures ◽  
Effort Provision ◽  
The Impact

Searching for and selecting among design solutions is not an effortless task. The principle of least effort suggests people seek to minimize the amount of effort they apply towards completing their tasks. In the context of engineering design, it is conceivable that expending more effort on the design problem yields a design solution with greater performance. In this paper, we investigate the impact of incentives on motivating engineering designers to increase the amount of effort they apply to solving design problems. Specifically, we formulate an analytical model of effort provision towards design tasks to compare two incentive structures: a probabilistic incentive and a deterministic incentive. With the probabilistic incentive, a designer’s final reward or penalty is uncertain, e.g. it is uncertain if a proposed design solution will meet requirements. With the deterministic incentive, a designer’s final reward or penalty is tied directly to the quality of the design solution as it is presented, e.g. a proposed design solution meets requirements with a certain probability as the figure of merit and the designer is directly rewarded or penalized on producing a design solution with that figure of merit. We parameterize the proposed analytical model and perform a parameter study to determine which incentive produces a more optimal design solution in the parameter space. Results show that there is no one dominant incentive structure, and the preferred incentive structure depends on how intense the reward or penalty is and how a designer subjectively valuates his effort.

The Effect of Taxation and Corruption on Firm Growth: An Empirical Investigation for Vietnam

2016 ◽  
pp. 5-29
Author(s):  
Bich Le Thi Ngoc
Keyword(s):  
International Development ◽  
Firm Growth ◽  
Empirical Investigation ◽  
Manufacturing Firms ◽  
Economic Management ◽  
Tax Rate ◽  
Percentage Point Increase ◽  
Percentage Points ◽  
Point Increase ◽  
The Impact

The aim of this study is to analyze empirically the impact of taxation and corruption on the growth of manufacturing firms in Vietnam. The study employed pooled OLS estimation and then instrument variables with fixed effect for the panel data of 1377 firms in Vietnam from 2005 to 2011. These data were obtained from the survey of the Central Institute for Economic Management and the Danish International Development Agency. The results show that both taxation and corruption are negatively associated with firm growth measured by firm sales adjusted according to the GDP deflator. A one-percentage point increase in the bribery rate is linked with a reduction of 16,883 percentage points in firm revenue, over four and a half times bigger than the effect of a one-percentage point increase in the tax rate. From the findings of this research, the author recommends the Vietnam government to lessen taxation on firms and that there should be an urgent revolution in anti-corruption policies as well as bureaucratic improvement in Vietnam.

Financial and monetary policy of the State and its impact on the income level and poverty reduction in Russia

2020 ◽  
Vol 26 (5) ◽  
pp. 964-990
Author(s):  
N.I. Kulikov ◽  
V.L. Parkhomenko ◽  
Akun Anna Stefani Rozi Mobio
Keyword(s):  
Monetary Policy ◽  
Household Income ◽  
Poverty Reduction ◽  
The State ◽  
Financial Policy ◽  
Gdp Growth ◽  
Tax Rate ◽  
Gdp Growth Rate ◽  
The Government ◽  
The Impact

Subject. We assess the impact of tight financial and monetary policy of the government of the Russian Federation and the Bank of Russia on the level of household income and poverty reduction in Russia. Objectives. The purpose of the study is to analyze the results of financial and monetary policy in Russia and determine why the situation with household income and poverty has not changed for the recent six years, and the GDP growth rate in Russia is significantly lagging behind the global average. Methods. The study employs methods of analysis of scientific and information base, and synthesis of obtained data. The methodology and theoretical framework draw upon works of domestic and foreign scientists on economic and financial support to economy and population’s income. Results. We offer measures for liberalization of the financial and monetary policy of the government and the Central Bank to ensure changes in the structure of the Russian economy. The proposed alternative economic and financial policy of the State will enable the growth of real incomes of the population, poverty reduction by half by 2024, and annual GDP growth up to 6 per cent. Conclusions. It is crucial to change budget priorities, increase the salaries of public employees, introduce a progressive tax rate for individuals; to reduce the key rate to the value of annual inflation and limit the bank margin. The country needs a phased program to increase the population's income, which will ensure consumer demand.

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