Getting Americans to Save: In Defense of (Reformed) Tax Incentives

82 Pages Posted: 9 Nov 2016

See all articles by David Kamin

David Kamin

New York University School of Law

Date Written: November 7, 2016


According to the most recent literature, one of the primary systems for getting Americans to save more — a system of tax-preferred retirement accounts — is fundamentally broken and should be abandoned. This system of 401(k)s, Individual Retirement Accounts (IRAs), and other tax-preferred accounts cost the government about $80 billion per year, and influential new research by Raj Chetty, John Friedman, and co-authors — among others — suggests that tax incentives like these are unable to substantially increase private saving. However, this case against tax incentives is overstated. A comprehensive review of the literature suggests that tax incentives, in fact, probably can increase saving among many people — and particularly among those participating who are financially unsophisticated and have low savings. Further, the findings of Chetty, Friedman, and co-authors have been both over-interpreted and misinterpreted in important ways. Based on this and an analysis of the trade-offs involved in choosing among instruments to encourage greater saving, this article concludes that tax incentives should be used, but they should be appropriately targeted and deployed, unlike in the current system. And they should be used in combination with a mandatory saving floor and nudges to increase saving above that floor. This is an “all-of-the-above” approach — including the use of tax incentives — that reflects the apparent variation in how people react to these instruments and that should achieve better outcomes than using any one or two of these instruments alone.

Keywords: retirement, saving, tax incentives, mandates, nudges

JEL Classification: H24, J26

Suggested Citation

Kamin, David, Getting Americans to Save: In Defense of (Reformed) Tax Incentives (November 7, 2016). Tax Law Review, Forthcoming, Available at SSRN:

David Kamin (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics