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Pension saving responses to anticipated tax changes: Evidence from monthly pension contribution records
- Kreiner, Claus Thustrup, Leth-Petersen, Søren, Skov, Peer Ebbesen
- Economics letters 2017 v.150 pp. 104-107
- income, issues and policy, taxes
- A Danish tax reform, passed in May 2009 and taking effect from the beginning of 2010, lowered the marginal tax rate on top bracket taxable income from 63% to 56%. Because contributions to pension accounts are tax deductible, the reform provided an incentive to increase pension contributions before the change in taxation. Using high frequency panel data, we document a temporary increase in pension contributions in the second half of 2009 in response to the anticipated change in taxation, and that this led to an increase in total savings in this period. The response is driven by less than 5% of those affected by the policy.