Taxes and the labor supply of older Americans: Recent evidence from the social security earnings test

Gary V. Engelhardt, Anil Kumar

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

This paper summarizes recent work on the impact of taxation on the labor supply of older individuals, with a focus on the Senior Citizens Freedom to Work Act of 2000, which abolished the Social Security earnings test for those ages 65 to 69. For men age 65 to 69, the repeal increased earnings by 8 to 20 percent and hours by 5 to 16 percent. For women claiming Social Security benefits on their own earnings history, the repeal increased earnings by 20 percent. Estimates of the compensated elasticity of earnings with respect to the net-of-tax share range from 0.05 to 0.12. Labor supply is very inelastic, even accounting for adjustment costs.

Original languageEnglish (US)
Pages (from-to)443-458
Number of pages16
JournalNational Tax Journal
Volume67
Issue number2
DOIs
StatePublished - Jun 2014

Keywords

  • Earnings test
  • Labor supply
  • Taxes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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