Working Paper: NBER ID: w2117
Authors: Michael J. Boskin; Douglas J. Puffert
Abstract: This paper presents the results of a computer simulation of the expected present value of benefits, taxes, and transfers, rates of return, and marginal linkage of benefits and taxes for persons of different income levels and family status. A number of important issues associated with the "deal" and incentives projected to be offered by the current social security system for different family situations are treated: married versus single persons, number of earners in the family and the division of earnings between them, and the special situation of widows and divorcees. The results show tremendous variation for different family situations and often dwarf amounts at stake for most families in the recent debates over income tax reform. We pay particular attention to items such as marriage penalties and subsidies, incentives to postpone divorce and low marginal linkage of expected benefits to incremental taxes paid by women, whether as second earners in a family, divorcees or widows.
Keywords: Social Security; Family; Income Tax Reform
JEL Codes: H55; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family structure (J12) | expected benefits and taxes (H20) |
| single-earner couples (J12) | higher internal rate of return on taxes paid (H23) |
| two-earner couples (J12) | lower internal rate of return on taxes paid (H23) |
| loss of benefits associated with death of a spouse (J17) | poor returns for widows (D14) |
| loss of benefits associated with dissolution of marriage (J12) | poor returns for divorcees (J12) |
| low earnings (J31) | disproportionately low amount received from social security (H55) |