Social Security and Labor Supply Incentives
AbstractMany provisions of the Social Security Program distort an individual's labor supply incentives. In particular, the payroll tax, the earnings test, the offsetting actuarial adjustment, and the dependence of the size of future benefits on the level of current earnings all affect the net return to extra work. The purpose of this paper is to estimate the size of the net tax rate on labor income in a variety of circumstances, taking into account all these provisions, as well as the personal income tax. We find that the Social Security Program on net in the past has provided a large subsidy to labor supply, which for many people effectively offset the personal income tax. This subsidy rate, however, has been declining steadily over time.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0986.
Date of creation: Sep 1982
Date of revision:
Publication status: published as Gordon, Roger H. "Social Security and Labor Supply Incentives." Contemporary Economic Policy, Vol. 1, no. 3. (April 1983), pp. 16-22.
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- NEP-ALL-2002-03-14 (All new papers)
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- Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1980. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
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"Social Security Rules and Marginal Tax Rates,"
National Tax Journal,
National Tax Association, vol. 45(1), pages 1-22, March.
- Brian S. Armour & M. Melinda Pitts, 2002. "Incorporating insurance rate estimates and differential mortality into net marginal Social Security tax rate calculations," Working Paper 2002-29, Federal Reserve Bank of Atlanta.
- Louis Kaplow, 2006. "Myopia and the Effects of Social Security and Capital Taxation on Labor Supply," NBER Working Papers 12452, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Laurence J. Kotlikoff, 1985. "The Efficiency Gains from Social Security Benefit - Tax Linkage," NBER Working Papers 1645, National Bureau of Economic Research, Inc.
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