Tax Review: Social Security, Tax Reform and Capital Accumulation

February 1, 1976

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Volume XXXVII No. 2

Executive Summary
Public alarm over the impending bankruptcy of the Social Security system and cries of alarm about “capital shortage” are misguided and divert attention form the main point: the need for a higher rate of U.S. capital accumulation, both now and in the future. “A dollar invested today would yield society two dollars of consumption, measured in 1975 prices, after only 5 or 6 years. This high reward for current sacrifices is the reason to increase our national savings rate.” Professor Feldstein holds that corporate tax integration, while highly desirable for other reasons, would not predictably increase the rate of savings and capital formation, but he sees reform of the Social Security system as a potent method of doing so.


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