Tax-Benefit Linkages in Public Pension Systems: A Note

This note shows that a public pension system with a fairly general individual tax-benefit linkage is (computationally) equivalent to a system without linkages. The "equivalent" pension system without linkages not only facilitates simulations of policy experiments but also offers some insight into the implied tax structure of the tax-benefit linkage. It is shown that implicit tax rates may differ considerably across age groups even if the statutory tax rate is constant over the life-cycle.