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Increasing saving may be desirable, but it is not the only goal of tax policy. Policymakers also must be sure to distribute the tax burden
Increasing saving may be desirable, but it is not the only goal of tax policy. Policymakers also must be sure to distribute the tax burden fairly. The problem with proposals to increase the incentive to save is that they increase the tax burden on those who can least afford it. It is undeniable that high-income households save a greater fraction of their income than low-income households. As a result, any tax change that favors people who save will also tend to favor people with high income. Policies such as tax-advantaged retirement accounts may seem appealing, but they lead to a less egalitarian society. By reducing the tax burden on the wealthy who can take advantage of these accounts, they force the government to raise the tax burden on the poor
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