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Neutral Taxation of Pension in a Comprehensive Income Tax

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  • Dirk Kiesewetter
  • Rainer Niemann

Abstract

We derive an ex post neutral comprehensive income tax on pension schemes equivalent to a Johansson-Samuelson tax that guarantees nondiscriminatory treatment of lifetime-dependent and other investments. By separately taxing contributions and benefits, our concept does not require any assumptions on the return of a pension scheme and therefore is of special interest for taxing public PAYGO schemes. Assuming constant tax and interest rates, the system is characterized by constant fractions of deductible contributions and taxable pensions. The tax base from neutral pension taxation considerably exceeds the one under existing legislation, e.g. in Germany or in the U.S..

Suggested Citation

  • Dirk Kiesewetter & Rainer Niemann, 2002. "Neutral Taxation of Pension in a Comprehensive Income Tax," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 227-248, May.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(2002/200305)59:2_227:ntopia_2.0.tx_2-6
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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