1. How Progressive Are the Combined Net Benefits of Social Security and Tax Benefits for Retirement Saving? Prepared for the 16 th Annual RRC Conference, August 7, 2014 by Karen Smith and Eric Toder Urban Institute and Tax Policy Center 1

2. Motivation 2

3. Methods Urban Institute’s DYNASIM Model http://www.urban.org/UploadedPDF/41251 2-Projection-Methods-Used-in-the- Dynamic-Simulation-of-Income-Model.pdfhttp://www.urban.org/UploadedPDF/41251 2-Projection-Methods-Used-in-the- Dynamic-Simulation-of-Income-Model.pdf 3

4. Point 1 4 Estimated distributional effects of any specific spending program or tax subsidy depend on how it is financed

5. How are retirement saving incentives funded? 1) Tax rates 3.84 percent higher. 2) Tax rates 0.9 percentage points higher. 3) Taxes for everyone 15 and over $200 higher. 5

6. Point 2 OASDI is progressive 6

7. Net OASDI benefits are positive and rising over time 7

8. Net OASDI as a Share of Lifetime Earnings 8 (1980-1989 cohorts)

9. Point 3 Tax incentives for retirement saving favor higher earners, but how much depends on how we assume they are financed 9

10. Increase in Net Retirement Income as a Share of Lifetime Earnings 10

11. Point 4 Two programs together are progressive 11

12. Combined Net Benefits as Share of Net Lifetime Earnings 12

13. Extensions 13