Generational Accounts And Lifetime Tax Rates, 1900-1991

Generational accounting is a new method for determining how government deficits, taxes, transfer payments, and other expenditures affect the distribution of income and wealth among different generations.The technique is still being developed, and a number of the assumptions used to estimate the accounts are controversial. Auerbach, Gokhale, and Kotl~koff (19911, Kotlikoff (19921, and Office of Management and Budget (1992) explain the basic concept and present some illustrative results. This article updates the baseline generational accounts reported in the 1993 federal budget and estimates the effects of several new alternative policies. It also extends the analysis for the first time to lifetime net tax rates-the taxes that a generation pays, less the Social Security and other transfer benefits that it receives, as a percentage of income over its entire lifetime. The new analysis reveals the following: