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Income and Payroll Tax Policy and Labor Supply

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  • Jerry A. Hausman

Abstract

This paper considers both theoretical quest ions and empirical measures of the effects of various policies of income and payroll taxation on labor supply. It emphasizes deadweight loss as the correct criterion of taxation evaluation, rather than merely output effects. Distributional issues are also discussed. Simulations are done for the Kemp-Roth tax reform proposals to calculate both revenue effects and changes in deadweight loss. Deadweight loss calculations are also done for an equal yield progressive linear income tax.

Suggested Citation

  • Jerry A. Hausman, 1980. "Income and Payroll Tax Policy and Labor Supply," NBER Working Papers 0610, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0610
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    1. Alan J. Auerbach & Harvey S. Rosen, 1980. "Will the Real Excess Burden Please Stand Up? (Or, Seven Measures in Search of a Concept)," NBER Working Papers 0495, National Bureau of Economic Research, Inc.
    2. Michael J. Boskin & Eytan Sheshinski, 1976. "Optimal Income Redistribution When Individual Welfare Depends Upon Relative Income," NBER Working Papers 0144, National Bureau of Economic Research, Inc.
    3. Ray C. Fair, 1971. "The Optimal Distribution of Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(4), pages 551-579.
    4. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    5. J. A. Hausman, 1980. "The Effect of Taxes on Labor Supply," Working papers 254, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    7. Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, vol. 13(1), pages 111-119, February.
    8. R. E. Hall, 1970. "Wages, Income and Hours of Work in the U. S. Labor Force," Working papers 62, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. Diamond, P. A. & McFadden, D. L., 1974. "Some uses of the expenditure function in public finance," Journal of Public Economics, Elsevier, vol. 3(1), pages 3-21, February.
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    Cited by:

    1. Daniela Andrén & Thomas Andrén, 2016. "Women’s and men’s responses to in-work benefits: the influence of children," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-24, December.

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