Taxes on Savings - PAM2040 Taxes on Savings...

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PAM 2040 Taxes on Savings
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Savings and Taxation Taxation on capital income vs. labor income Income earned from savings Intertemporal utility substitution Do I consume now or consume later? What is the relative price of consumption tomorrow?
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Simple Theoretical Model of  Intertemporal Choice Key Concept: Intertemporal budget constraint
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Taxation and Savings: Theory Opportunity cost of consuming today? Consuming tomorrow (Y-C 1 )(1+r)=(S)(1+r) Typically include time discounting E(U)=U(C 1 )+βU(C 2 ) Taxing interest income decreases the cost of consuming today (Y-C 1 )(1+r(1-t))
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Taxation and Savings: Theory Income and Substitution effects: How will consumption in period 1 change relative to consumption in period 2? What is the substitution effect? What is the income effect?
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Inflation and Savings Taxation Recall AMT problem Nominal qualification standards Interest rate of 10%, inflation of 4% Real Interest rate = [(1+Interest)/(1+Inflation)]-1
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Taxes on Savings - PAM2040 Taxes on Savings...

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