Sage Journals: Discover world-class research

Abstract

This study extends the literature on net marginal tax rates created by the Social Security program by including variations in both the probability of being eligible to receive benefits and earnings-related life expectancy. Previous literature has found that women incur a lower net marginal tax rate because they have longer life expectancies. The results in this article indicate that including variations in eligibility for benefits partially reverses this result by increasing net marginal Social Security tax rates for older women. Furthermore, the existing literature has shown that low-earnings households pay lower net marginal tax rates because the benefit formula is progressive. Including variations in life expectancy reduces but does not eliminate this result. This implies that differential mortality increases the net marginal Social Security tax rates incurred by low-earnings households. These results are important from a policy standpoint, given the current debate on the future of the Social Security system.

Keywords

Social Security net marginal tax rates earnings-related life expectancy retirement average indexed monthly earnings differential mortality

Get full access to this article

View all access options for this article.

References

Aaron, H. J. 1977. Demographic effects on the equity of Social Security benefits. In Economics of public service, edited by Martin S. Feldstein and Robert P. Inman , 151-173. New York: Macmillan.

Brittain, J. A. 1972. The incidence of the Social Security payroll tax. American Economic Review 61 (1): 110-125.

Browning, E. K. 1975. Labor supply distortions of Social Security. Southern Economic Journal 42 (2): 243-252.

Browning, E. K. 1985. The marginal Social Security tax on labor. Public Finance Quarterly 13 (3): 227-251.

Burkhauser, R. V. , and J. A. Turner. 1985. Is the Social Security payroll tax a tax? Public Finance Quarterly 13 (3): 253-267.

Duleep, H. O. 1989. Measuring socio-economic mortality differentials over time. Demography 26 (2): 345-351.

Duleep, H. O. 1995. Mortality and income equality among economically developed countries. Social Security Bulletin 58 (2): 34-50.

Feldstein, M. , and A. Samwick. 1992. Social Security rules and marginal tax rates. National Tax Journal 45 (1): 1-22.

Ferber, M. 1993. Women’s employment and the Social Security system. Social Security Bulletin 56 (3): 33-55.

10.

Garrett, D. M. 1995. The effects of differential mortality rates on the progressivity of Social Security. Economic Inquiry 33 (3): 457-475.

11.

Hausman, J. A. 1981. Income and payroll tax policy and labor supply. In Proceedings of the Fifth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis, edited by L. H. Mayer , 173-202. St. Louis, MO: Federal Reserve Bank of St. Louis.

12.

Killingsworth, M. R. 1983. Labor supply. New York: Cambridge University Press.

13.

Kitagawa, E. M. , and P. M. Hauser. 1973. Differential mortality in the United States: A study in socioeconomic epidemiology. Cambridge, MA: Harvard University Press.

14.

Leimer, D. R. 1978. Projected rates of return to future Social Security retirees under alternative benefit structures. In Policy analysis with Social Security research files, Research Report No. 52, 235-67. Washington, DC: Office of Research and Statistics, Social Security Administration.

15.

Leimer, D. R. 1995. A guide to Social Security money’s worth issues. Social Security Bulletin 58 (2): 3-20.

16.

Nichols, Orlo R. , Michael D. Clingman , and Milton P. Glanz. 2001. Internal real rates of return under the OASDI program for hypothetical workers: Actuarial note no. 144. Washington, DC: Social Security Administration.

17.

U.S. Department of Health and Human Services . 1992. Life tables for the United States Social Security area 1900-2080. Study no. 107. Washington, DC: Social Security Administration, Office of the Actuary.

18.

U.S. Department of Health and Human Services . 2000a. Annual statistical supplement to the Social Security bulletin. Washington, DC: Social Security Administration, Office of Policy.

19.

U.S. Department of Health and Human Services . 2000b. The 2000 report of the board of trustees of the Federal Old Age and Survivors Insurance and Disability Insurance Trust Funds. Washington, DC: Social Security Administration, Office of Policy.

20.

U.S. Department of Health and Human Services . 2001. Annual statistical supplement to the Social Security bulletin. Washington, DC: Social Security Administration, Office of Policy.

21.

U.S. Department of Health and Human Services . 2002. Annual statistical supplement to the Social Security bulletin. Washington, DC: Social Security Administration, Office of Policy.

Incorporating Insurance Rate Estimates and Differential Mortality into the Net Marginal Social Security Tax Rate Calculation

Abstract

Keywords

Get full access to this article

References