The Impact of Labor Taxes on Labor Supply: An International Perspective Richard Donald Rogerson

ISBN: 9780844743578

Published: June 16th 2010

ebook

128 pages


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The Impact of Labor Taxes on Labor Supply: An International Perspective  by  Richard Donald Rogerson

The Impact of Labor Taxes on Labor Supply: An International Perspective by Richard Donald Rogerson
June 16th 2010 | ebook | PDF, EPUB, FB2, DjVu, talking book, mp3, RTF | 128 pages | ISBN: 9780844743578 | 4.49 Mb

As the Bush-era tax cuts are set to expire in 2010, ambitious health care legislation is moving through Congress, and entitlement programs are growing at unsustainable rates, U.S. policymakers face important questions about the optimal size and scopeMoreAs the Bush-era tax cuts are set to expire in 2010, ambitious health care legislation is moving through Congress, and entitlement programs are growing at unsustainable rates, U.S. policymakers face important questions about the optimal size and scope of federal spending.

The federal government finances its spending through labor taxes, including taxes on income, payroll, and consumption-taxes that generate significant disincentives for employment. In Taxes, Transfers, and Labor Supply: An International Perspective, Richard Rogerson contends that the unintended consequences of increased labor taxes would be too large for policymakers to ignore.

Rogerson compares fifty years of time series data from the United States and fourteen other OECD countries. He finds that a 10 percentage point increase in the tax rate on labor leads to a 10 to 15 percent decrease in hours of work. Even a 5 percent decrease in hours worked would mean a decline in labor market productivity equating to a serious recession.

But, whereas recessions are temporary, changes in government spending patterns have permanent repercussions. Although government spending provides citizens with many important benefits, these benefits must be weighed against the disincentivizing effects of increased labor taxes. Policymakers who fail to account for this decrease in labor productivity risk expanding government programs beyond the economys ability to support them.



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