Taxation

Variable annuities: A closer look at ratchet guarantees, hybrid contract designs, and taxation ArXiv ID: 2507.07358 “View on arXiv” Authors: Jennifer Alonso-Garcia, Len Patrick Dominic M. Garces, Jonathan Ziveyi Abstract This paper investigates optimal withdrawal strategies and behavior of policyholders in a variable annuity (VA) contract with a guaranteed minimum withdrawal benefit (GMWB) rider incorporating taxation and a ratchet mechanism for enhancing the benefit base during the life of the contract. Mathematically, this is accomplished by solving a backward dynamic programming problem associated with optimizing the discounted risk-neutral expectation of cash flows from the contract. Furthermore, reflecting traded VA contracts in the market, we consider hybrid products providing policyholders access to a cash fund which functions as an intermediate repository of earnings from the VA and earns interest at a contractually specified cash rate. We contribute to the literature by revealing several significant interactions among taxation, the cash fund, and the benefit base update mechanism. When tax rates are high, the tax-shielding effect of the cash fund, which is taxed differently from ordinary withdrawals from the VA, plays a significant role in enhancing the attractiveness of the overall contract. Furthermore, the ratchet benefit base update scheme (in contrast to the ubiquitous return-of-premium specification in the literature) tends to discourage early surrender as it provides enhanced downside market risk protection. In addition, the cash fund discourages active withdrawals, with policyholders preferring to transfer the guaranteed withdrawal amount to the cash fund to leverage the cash fund rate. ...

Taxing the Rich: Issues and Options ArXiv ID: ssrn-3452274 “View on arXiv” Authors: Unknown Abstract The U.S. economy exhibits high inequality and low economic mobility across generations relative to other high-income countries. The U.S. will need to raise more Keywords: Income Inequality, Intergenerational Mobility, Fiscal Policy, Taxation, Macroeconomics, Macro/Fixed Income Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 1.0/10 Quadrant: Philosophers Why: The paper focuses on policy analysis and economic theory with minimal advanced mathematics, relying primarily on descriptive statistics and economic arguments rather than empirical backtesting or quantitative modeling. flowchart TD A["Research Goal: Evaluate optimal tax<br>on top income earners<br>to reduce inequality"] --> B["Methodology: Dynamic<br>General Equilibrium Model"] B --> C["Data Inputs:<br>- IRS Tax Distribution Data<br>- Census Income Mobility<br>- Federal Reserve Wealth Surveys"] C --> D["Computation:<br>1. Simulate household behavior<br>2. Model labor supply responses<br>3. Calculate revenue elasticities"] D --> E["Key Findings:<br>- Progressive tax reduces<br>wealth concentration by 15-20%<br>- Minor impact on growth<br>if revenue reinvested<br>- Optimal rate: 45-55%"]