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Utilization of the Saver's Credit: An Analysis of the First Year

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  • Koenig, Gary
  • Harvey, Robert

Abstract

We examine the utilization of the saver's credit in the first year of availability. The credit is a nonrefundable tax credit for low– and moderate–income taxpayers who make contributions to a retirement plan. For taxpayers who claimed the credit at the maximum credit rate, we find that almost 43 percent had their tax credit limited by their tax liability. Tax liability should become a greater constraint in the future because the income limits are not indexed for inflation. We also find that 34 percent of qualified taxpayers could have claimed $496 million in the saver's credit, but failed to do so. In total, this paper may prove helpful to policy makers in considering the future design of the saver’s credit and researchers in estimating the behavioral response to the credit.

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  • Koenig, Gary & Harvey, Robert, 2005. "Utilization of the Saver's Credit: An Analysis of the First Year," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 787-806, December.
    • Handle: RePEc:ntj:journl:v:58:y:2005:i:4:p:787-806
    DOI: 10.17310/ntj.2005.4.08
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    Cited by:

    1. Bradley T. Heim & Ithai Z. Lurie, 2014. "Taxes, Income, And Retirement Savings: Differences By Permanent And Transitory Income," Contemporary Economic Policy, Western Economic Association International, vol. 32(3), pages 592-617, July.
    2. Chan, Marc K. & Polidano, Cain & Vu, Ha & Wilkins, Roger & Carter, Andrew & To, Hang, 2020. "How Effective are Matching Schemes in Enticing Low-income Earners to Save More for Retirement? Evidence from a National Scheme," IZA Discussion Papers 13939, Institute of Labor Economics (IZA).

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