The Implicit Tax on Work at Older Ages

• Published in: National tax journal Vol. 59; no. 2; pp. 211 - 234
• Main Authors: Butrica, Barbara A., Johnson, Richard W., Smith, Karen E., Steuerle, C. Eugene
• Format: Journal Article
• Language: English
• Published: Chicago National Tax Association 01-06-2006; The University of Chicago Press; University of Chicago Press
• Subjects: Age; Beneficiaries; Consumption; Divorce; Earnings; Employee benefits; Employers; Employment; Incentives; Income taxes; Laws, regulations and rules; Lifetime; Marital status; Medicare; Old age benefits; Older workers; Payroll taxes; Pensions; Retirement; Retirement benefits; Social security; Social Security benefits; Social security tax; Social security taxes; Studies; Tax benefits; Tax rates; Taxation; Wages & salaries; Workers; United States > US
• ISSN: 0028-0283; 1944-7477
• DOI: 10.17310/ntj.2006.2.02

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.