Under standard assumptions, both individuals and the government are indifferent between traditional tax-deferred retirement accounts and "front-loaded" (Roth) accounts. When we add investment fees to this benchmark, individuals are still indifferent but the government is not. We estimate that tax deferral increases demand for asset management services by $3 trillion, causing the government to pay $20.7 billion in corresponding annual fees. In a general equilibrium model with asset management services as differentiated products, we examine the incidence and welfare implications of the added demand. Tax deferral in our model produces a larger asset management industry, higher taxes, and lower social welfare.
Landoni, Mattia, and Stephen Zeldes. "Should the Government Be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?" Columbia Business School, January 11, 2020.
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