Working Paper: NBER ID: w0986
Authors: Roger H. Gordon
Abstract: Many 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.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| payroll tax (p) (H29) | net tax rate (t) (H29) |
| personal income tax (m) (H24) | net tax rate (t) (H29) |
| earnings test (e) (H55) | net tax rate (t) (H29) |
| future benefits (b) (H55) | net tax rate (t) (H29) |
| social security provisions (H55) | labor supply incentives (J20) |
| net tax rate (t) (H29) | labor supply decisions (J22) |