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Tax Rates and Work Incentives in the Social Security Disability Insurance Program: Current Law and Alternative Reforms

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  • Hoynes, Hilary Williamson
  • Moffitt, Robert

Abstract

This paper examines the work incentives in the Social Security Disability Insurance (SSDI) Program under current law and proposed reforms. We begin with a discussion of the expected effect of the program on work effort according to the basic static labor supply model. In addition, we provide a numerical simulation that shows the magnitude of the monetary incentives provided by current law and the reforms for different categories of individuals. We find that the proposed reforms have ambiguous effects on work effort and could, contrary to perceived wisdom, possibly reduce work effort and increase the number of SSDI recipients.

Suggested Citation

  • Hoynes, Hilary Williamson & Moffitt, Robert, 1999. "Tax Rates and Work Incentives in the Social Security Disability Insurance Program: Current Law and Alternative Reforms," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(4), pages 623-654, December.
  • Handle: RePEc:ntj:journl:v:52:y:1999:i:4:p:623-54
    DOI: 10.1086/NTJ41789422
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    Citations

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    Cited by:

    1. Philippe Ruh & Stefan Staubli, 2019. "Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 269-300, May.
    2. Andreas Ravndal Kostol & Magne Mogstad, 2014. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," American Economic Review, American Economic Association, vol. 104(2), pages 624-655, February.
    3. Sergi Jiménez-Martín & Arnau Juanmarti Mestres & Judit Vall Castello, 2017. "Hiring subsidies for people with disabilities: Do they work?," Policy Papers 2017-11, FEDEA.
    4. Koning, Pierre & van Sonsbeek, Jan-Maarten, 2017. "Making disability work? The effects of financial incentives on partially disabled workers," Labour Economics, Elsevier, vol. 47(C), pages 202-215.
    5. Myhre, Andreas, 2021. "Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs," MPRA Paper 109547, University Library of Munich, Germany.
    6. Nicole Maestas & Kathleen J. Mullen & Gema Zamarro, 2012. "Induced Entry into the Social Security Disability Program: Using Past SGA Changes as a Natural Experiment," Working Papers wp262, University of Michigan, Michigan Retirement Research Center.
    7. Hamish Low & Luigi Pistaferri, 2015. "Disability Insurance and the Dynamics of the Incentive Insurance Trade-Off," American Economic Review, American Economic Association, vol. 105(10), pages 2986-3029, October.
    8. Alexander Gelber & Timothy J. Moore & Alexander Strand, 2017. "The Effect of Disability Insurance Payments on Beneficiaries' Earnings," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 229-261, August.
    9. Zaresani, Arezou & Olivo-Villabrille, Miguel, 2022. "Return-to-work policies’ clawback regime and labor supply in disability insurance programs," Labour Economics, Elsevier, vol. 78(C).
    10. repec:eee:labchp:v:3:y:1999:i:pc:p:3417-3528 is not listed on IDEAS
    11. Zaresani, Arezou, 2020. "Adjustment cost and incentives to work: Evidence from a disability insurance program," Journal of Public Economics, Elsevier, vol. 188(C).
    12. Judit Vall Castelló, 2017. "What happens to the employment of disabled individuals when all financial disincentives to work are abolished?," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 158-174, September.
    13. David T. Ellwood, 2001. "The Sputtering Labor Force of the 21st Century. Can Social Policy Help?," NBER Working Papers 8321, National Bureau of Economic Research, Inc.
    14. Sergi Jiménez-Martín & Arnau Juanmartí Mestres & Judit Vall Castelló, 2019. "Hiring subsidies for people with a disability: do they work?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(5), pages 669-689, July.

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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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