Macroeconomic Effects of Social Security and Tax Reform in the United States

22 Pages Posted: 3 Mar 2006

See all articles by Tamim Bayoumi

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Dennis P. J. Botman

International Monetary Fund (IMF) - Fiscal Affairs Department

Manmohan Kumar

International Monetary Fund (IMF) - Research Department

Date Written: November 2005

Abstract

We use the IMF's Global Fiscal Model to evaluate recent proposals to reform social security and the tax system in the United States. Introducing personal retirement accounts is unlikely to yield significant macroeconomic benefits unless it spurs additional fiscal consolidation to prevent a large increase in government debt. Similar benefits are obtained if the social security surplus is placed in a lockbox while maintaining the same debt target. Lowering the taxation of investment income is beneficial, but only if the reform is revenue neutral. Debt-neutral social security and tax reform in the United States has large positive effects on the rest of the world.

Keywords: Personal retirement accounts, fiscal consolidation, tax reform, global fiscal model

JEL Classification: H21, H30, H55, F41

Suggested Citation

Bayoumi, Tamim and Botman, Dennis P. J. and Kumar, Manmohan, Macroeconomic Effects of Social Security and Tax Reform in the United States (November 2005). IMF Working Paper, Vol. , pp. 1-22, 2005. Available at SSRN: https://ssrn.com/abstract=888077

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Dennis P. J. Botman

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Manmohan Kumar

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7771 (Phone)
202-589-7771 (Fax)

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