Disincentive to Work

Two chapters from a forthcoming NBER volume.

1. Alan J. Auerbach and others:

We conclude by addressing the question posed in this paper’s title, Is Uncle Sam
Inducing the Elderly to Retire?
Based on the work disincentives Uncle Sam imposes on the
elderly, the answer seems clearly to be yes. But an open question is the extent to which the
elderly correctly perceive these disincentives. Indeed, given the complexity and interactions of
our fiscal system and the heretofore reliance on current-year marginal net tax rates, it’s hard to
believe that policymakers, themselves, are cognizant of the level and spread of the work
disincentives they are imposing on the elderly.

2. Gizem Kosar and Robert Moffitt:

families participating in two or more [needs-based] programs, while still facing negative or modest positive rates at low earnings, usually face considerably higher MTRs [marginal tax rates] at higher earnings ranges, often up to 80 percent and even occasionally over 100 percent. While the fraction of families in this category is not large, they constitute about one-fifth of single parent families and this should be a cause for policy concern.

You do remember my argument for replacing these programs with a single basic income, don’t you?

3 thoughts on “Disincentive to Work

  1. And you do remember how people’s main worry is that you can’t make a grand bargain.

    The kind of people plugging UBI need to prove they can win a fight against the left, a real fight. So far its just one long line of simpering surrender, how do we know this won’t just be another giveaway for orcs thrown on top of the rest.

  2. The Left will never support a single basic income program, except in addition to existing programs, because a single basic income program would not offer sufficient employment for bureaucrats and “helping” professionals. Wasn’t this the real reason Ted Kennedy killed the Nixon/Moynihan “negative income tax” proposal back in the early 70s?

    To be fair, just sending poor people money is unlikely to solve their underlying problems, in many or most cases.

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