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The effects of collecting income taxes on Social Security benefits

John Bailey Jones and Yue Li ()

Journal of Public Economics, 2018, vol. 159, issue C, 128-145

Abstract: Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent change in the payroll tax would increase labor supply, consumption, and welfare. From an ex-ante perspective an equally desirable reform would be to make the portion of benefits subject to income taxes completely independent of other income.

Keywords: Social Security; Labor supply; Taxation (search for similar items in EconPapers)
JEL-codes: E21 H24 H55 I38 (search for similar items in EconPapers)
Date: 2018
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Working Paper: The Effects of Collecting Income Taxes on Social Security Benefits (2017) Downloads
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