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Social Security Rules and Marginal Tax Rates

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  • Martin Feldstein
  • Andrew Samwick

Abstract

The social security payroll tax has become the largest tax paid by the majority of American households. Although, the statutory marginal social security tax rate is the same for all those with wage and salary income up to the maximum level, the complex rules linking social security taxes and subsequent benefits imply that the net marginal social security tax on individual earnings varies substantially among individuals. For some taxpayers, the net marginal social security tax is equal to the statutory rate, while for other taxpayers the combined effect of the tax and the resulting benefits implies a very much lower net marginal tax rate or even a negative marginal tax rate when the incremental benefits exceed the additional taxes.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3962.

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Date of creation: Aug 1992
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Publication status: published as National Tax Journal, Vol. 45, No. 1, pp. 1-22, (March 1992).
Handle: RePEc:nbr:nberwo:3962

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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Hausman, Jerry A., 1985. "Taxes and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 4, pages 213-263 Elsevier.
  2. Roger H. Gordon, 1982. "Social Security and Labor Supply Incentives," NBER Working Papers 0986, National Bureau of Economic Research, Inc.
  3. Feldstein, Martin S, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 303-20, May.
  4. Feldstein, Martin & Samwick, Andrew A., 1992. "Social Security Rules and Marginal Tax Rates," National Tax Journal, National Tax Association, vol. 45(1), pages 1-22, March.
  5. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-57, October.
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