Labor Supply Responses to Changes in the Payroll Tax for Older Individuals

Published: 2015
Project ID: UM15-04


Recent work has provided evidence that older individuals are especially responsive to income taxes and will delay retirement when the tax code is more generous. Some of this work has included predictions of the labor supply effects of payroll tax reductions for individuals above the full retirement age and found meaningful effects. However, this work has assumed that individuals respond to income taxes and payroll taxes to the same degree, though there are reasons to believe that the behavioral responses may be different. This project will use the recent 2011-2012 change in the payroll tax to estimate the intensive and extensive labor supply effects on older individuals. This project will model the labor supply and Social Security claiming responses using 2009-2013 data, providing the first estimates using actual changes in the payroll tax.


David Powell