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

By Tamim Bayoumi, Dennis P Botman, Manmohan S. Kumar

November 1, 2005

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Tamim Bayoumi, Dennis P Botman, and Manmohan S. Kumar Macroeconomic Effects of Social Security and Tax Reform in the United States, (USA: International Monetary Fund, 2005) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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. Debtneutral social security and tax reform in the United States has large positive effects on the rest of the world.

Subject: Financial services, Fiscal policy, Labor taxes, Personal income tax, Public debt, Real interest rates, Taxes

Keywords: Consolidation yield, Fiscal consolidation, Global, Global fiscal model, Income tax, Introducing PRAs, Labor income tax base, Labor taxes, Personal income, Personal income tax, Personal income tax base, Personal income taxation, Personal income taxation of capital, Personal retirement accounts, Real interest rates, Reform in the United States, Tax, Tax reform, Tax reform in the United States, Taxation of capital, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/208
Stock No:

WPIEA2005208
ISBN:

9781451862270
ISSN:

1018-5941

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