The Impact of Labor Taxes on Labor Supply

  • Title:

    The Impact of Labor Taxes on Labor Supply
  • Format:

    HardCover
  • Hardcover Price:

    34.95
  • Hardcover ISBN:

    978-0-8447-4355-4
  • Hardcover Dimensions:

    6" x 9"
  • 128 Hardcover pages
  • Buy the Book

Click here to purchase this book on Amazon

As the Bush-era tax cuts are set to expire in 2010, ambitious health care legislation has passed 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 mostly through labor taxes, including taxes on income, payroll, and consumption--taxes that generate significant disincentives for employment. In The Impact of Labor Taxes on 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 output equating to a serious recession. While recessions are temporary, permanent changes in government spending patterns have long-lasting repercussions.

Although government spending provides citizens with many important benefits, such benefits must be weighed against the disincentivizing effects of increased labor taxes. Policymakers who fail to account for the decrease in labor output risk expanding government programs beyond their optimal scale.

Richard Rogerson
is the Rondthaler Professor of Economics and a Regents’ Professor at the W. P. Carey School of Business at Arizona State University.

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

Defeating ISIS: AEI experts weigh-in before the president’s address on Wednesday
image Degrading, defeating, and destroying the Islamic State
image Wealth Building Home Loan: Building wealth through homeownership and retirement savings
image The $3 iPhone
AEI on Facebook
Events Calendar
  • 15
    MON
  • 16
    TUE
  • 17
    WED
  • 18
    THU
  • 19
    FRI
Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Event Registration is Closed
Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Event Registration is Closed
Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.