Department of Finance

 

Date of this Version

1994

Document Type

Article

Citation

Journal of Actuarial Practice 2 (1994), 293-297

Comments

Copyright 1994 Absalom Press

Abstract

In the paper entitled "Tax Assistance to Qualified Retirement Savings Plans: Deferral or Waiver," Robert L. Brown concludes that "the nontaxation of investment income on qualified funds until taken is a tax waiver or tax subsidy from the government to participants of qualified plans". I believe, however, that this conclusion is based on flawed assumptions pertaining to:

• The behavioral responses of taxpayers to the withdrawal of such tax assistance;

• The definition of an appropriate benchmark tax system against which to measure the cost of such tax assistance; and

• The appropriate basis of comparison of alternative government tax revenue streams.

Using alternative and reasonable assumptions, I conclude instead that the nontaxation of investment income on qualified plans until taken provides gains to government and taxpayers alike.

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