Job Market Paper: The Impact of Withdrawal Penalties on Retirement Savings
(with Victoria Bryant)
Tax-benefited retirement accounts have features designed to encourage retirement savings, including a penalty for withdrawing before age 59.5. Account holders also face a penalty for failing to take required minimum withdrawals after age 72. Using a bunching analysis, we estimate that these penalties cause more than 17% of traditional IRA holders to change their withdrawal timing each year, shifting close to $60 billion of distributions annually. We estimate a dynamic life-cycle model and run counterfactual policy analysis to analyze the effect of changing these penalties. For both penalties, we find alternative combinations of age threshold and penalty rate that lead to increased average welfare and lifetime tax remittances: increasing the age threshold while simultaneously lowering the penalty rate for penalty-free withdrawals, and increasing the age threshold for required withdrawals while leaving the penalty rate unchanged.
Does Giving Tax Debtors a Break Improve Compliance and Income? Evidence from Quasi-Random Assignment of IRS Revenue Officers
(with William C. Boning, Joel Slemrod, and Alex Turk)
When economic hardship prevents a tax debtor from paying basic living expenses, the Internal Revenue Service puts debt collection efforts on hold and designates the debt currently not collectible (CNC). This paper uses the quasi-random assignment of IRS Revenue Officers to tax debtors' cases as an instrumental variable to identify the causal effects of suspending debt collection on tax compliance and future income. In contrast to uninstrumented estimates, we find no evidence that putting off attempts to collect debt reduces compliance with future tax obligations or future reported income. Among marginal hardship cases, pausing collection instead increases future income, specifically wages earned by the taxpayer's spouse.
Work in Progress
Untold Secrets of Tax Preparers, Complexity, and Compliance
(with Giacomo Brusco and Yeliz Kaçamak)