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 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 economy's ability to support them.
List Of Illustrations
Preface
Introduction 1
1 Labor Taxes And Hours Of Work: Some Theory 10
The Textbook Model of Labor Supply 11
A Diagrammatic Representation of the Consumption-Leisure Trade-Off 14
Income and Substitution Effects 16
Analyzing Tax Policy 18
The Social Cost of Higher Taxes 22
The Laffer Curve 23
Additional Tax Instruments 24
Additional Spending Policies 26
Summary 27
2 Labor Taxes And Hours Of Work: Where To Look For Evidence? 28
How Do We Know What We Think We Know? 28
Experimental Data from the Economy 32
Summary 35
3 Taxes, Government Spending, And Hours Of Work In The United States 36
U.S. Tax Rates on Labor 36
Properties of Government Spending in the United States 43
Hours of Work in the United States 46
Summary 50
4 What We Learn From The U.S. Experience 51
The Missing Factor 52
Home Production and Labor Supply 54
Changes in Home and Market Work 57
Reassessing the Relationship between Labor Taxes and Market Work 62
Summary 64
5 What We Learn From The Experience Of Other Countries 65
(0 Comentarios)
