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Key Findings Details

Tax Elasticity of Labor Earnings for Older Individuals
Abby Alpert and David Powell
WP 2012-272

  • Studying workers ages 55-74, we find that both men and women are less likely to work if their labor income is subject to higher taxes.  Men are more likely to report themselves as retired in response to tax increases.
  • We find suggestive evidence that increases in the marginal tax rate are associated with reductions in labor earnings.
  • Elimination of the employee portion of payroll taxes for this population would decrease the percentage of workers, both men and women, dropping out of the labor force by 1 percentage point, a 4 percent decrease from the baseline rate.

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