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The Implicit Tax on Work at Older Ages

Author

Listed:
  • Butrica, Barbara A.
  • Johnson, Richard W.
  • Smith, Karen E.
  • Steuerle, C. Eugene

Abstract

Encouraging work at older ages is a crucial policy goal for an aging society, but many features of the benefits and tax system discourage work. This study computes the implicit tax rate on work at older ages, broadly defined to include standard income and payroll taxes as well as changes in future Social Security benefits, employer–provided pension benefits, and health benefits associated with an additional year of employment. The results show that the implicit tax rate on work increases rapidly with age, rising from 14 percent at age 55 for a typical man to nearly 50 percent at age 70.

Suggested Citation

  • Butrica, Barbara A. & Johnson, Richard W. & Smith, Karen E. & Steuerle, C. Eugene, 2006. "The Implicit Tax on Work at Older Ages," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 211-234, June.
    • Handle: RePEc:ntj:journl:v:59:y:2006:i:2:p:211-34
    DOI: 10.17310/ntj.2006.2.02
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    References listed on IDEAS

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    1. Richard W. Johnson & Amy J. Davidoff & Kevin Perese, 2003. "Health Insurance Costs and Early Retirement Decisions," ILR Review, Cornell University, ILR School, vol. 56(4), pages 716-729, July.
    2. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, January-J.
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    1. Barbara A. Butrica & Howard M. Iams & Karen E. Smith & Eric J. Toder, 2009. "The Disappearing Defined Benefit Pension and its Potential Impact on the Retirement Incomes of Boomers," Working Papers, Center for Retirement Research at Boston College wp2009-2, Center for Retirement Research.
    2. Alicia H. Munnell & Steven A. Sass, 2007. "The Labor Supply of Older Americans," Working Papers, Center for Retirement Research at Boston College wp2007-12, Center for Retirement Research, revised Jun 2007.
    3. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2011. "Implicit Taxes on Work from Social Security and Medicare," Tax Policy and the Economy, University of Chicago Press, vol. 25(1), pages 69-88.
    4. Gopi Shah Goda, 2007. "Implicit Social Security Tax Rates over the Life Cycle," Discussion Papers 06-021, Stanford Institute for Economic Policy Research.
    5. Liebman, Jeffrey B. & Luttmer, Erzo F.P. & Seif, David G., 2009. "Labor supply responses to marginal Social Security benefits: Evidence from discontinuities," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1208-1223, December.
    6. World Bank, 2024. "Productive Longevity," World Bank Publications - Reports 42559, The World Bank Group.
    7. Hupfeld, Stefan, 2009. "Rich and healthy--better than poor and sick?: An empirical analysis of income, health, and the duration of the pension benefit spell," Journal of Health Economics, Elsevier, vol. 28(2), pages 427-443, March.
    8. Timothy F. Page & Karen Smith Conway, 2015. "The Labor Supply Effects of Taxing Social Security Benefits," Public Finance Review, , vol. 43(3), pages 291-323, May.
    9. Richard Woodbury, 2010. "Population aging and state pensions in New England," New England Public Policy Center Research Report 10-1, Federal Reserve Bank of Boston.
    10. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2009. "Removing the Disincentives in Social Security for Long Careers," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 21-38, National Bureau of Economic Research, Inc.

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