Tax-preferred Savings Accounts and Marginal Tax Rates: Evidence on RRSP Participation Kevin Milligan ~ Vancouver School of Economics ~ University of British Columbia

Tax-preferred Savings Accounts and Marginal Tax Rates: Evidence on RRSP Participation

Canadian Journal of Economics, Vol. 35, No. 3, (August, 2002), pp. 436-456.
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Abstract:

This paper studies the effect of taxes on participation in Registered Retirement Savings Plans between 1982 and 1996. Inter-provincial changes in the tax structure over this period provide identifying variation. Using this variation, I find that taxes influence households' participation decisions, but more weakly than previously estimated. A 10 percentage point increase in the marginal tax rate is estimated to increase the probability of participation by 8 percent. This explains only 5.1 percent of the trend in participation. I also find suggestive evidence that the carryforward mechanism may be used as an instrument for tax base smoothing.

Versions:

Published version, August, 2002: DOI.

UBC Discussion Paper No. 01-20, February, 2002: PDF.

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