We’re pleased to congratulate Timothy F. Page and Karen Smith Conway, winners of the Outstanding Paper Award of 2015 from Public Finance Review! Their award-winning article entitled “The Labor Supply Effects of Taxing Social Security Benefits” appeared in the May 2015 issue of Public Finance Review.
In 1983, federal and state governments began taxing the social security benefits of high-income elderly. We develop a conceptual model and use 1981–1986 Current Population Survey data to estimate the policy’s labor supply effects. Our estimates suggest that the approximate 20 percent reduction in benefits for the highest income individuals led to a two to five percentage point increase in their labor force participation. Using 2008 data, we show that failing to index the taxation thresholds for inflation, adding a second set of thresholds in 1993, and removing the earnings test in 2000 all substantially magnify the policy’s scope.