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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, August 29, 2006

The Implicit Tax on Work at Older Ages

Ntj_logo_3Barbara A. Butrica, Richard W. Johnson, Karen E. Smith & C. Eugene Steuerle (all of the Urban Institute) have published The Implicit Tax on Work at Older Ages, 59 Nat'l Tax J. 211 (2006).  Here is the abstract:

Encouraging work at older ages is a crucial policy goal for an aging society, but many features of the benefits and tax system discourage work. This study computes the implicit tax rate on work at older ages, broadly defined to include standard income and payroll taxes as well as changes in future Social Security benefits, employer–provided pension benefits, and health benefits associated with an additional year of employment. The results show that the implicit tax rate on work increases rapidly with age, rising from 14 percent at age 55 for a typical man to nearly 50 percent at age 70.

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That assumes that a skilled worker over the age of 50 can even get themselves hired (at somewhere beside McDs) when they want to work? Age discrimination is rampant in this country and is what is most discouraging to experienced workers, because they are valued less than those 25-35 years younger (who are perceived to be more creative and energetic.)

Posted by: L Logan | Aug 29, 2006 11:12:26 AM

As a 25-35 year old attempting to find a job as a lawyer, I disagree with your assertion about age discrimination. The fifty-plus crowd currently holding managerial positions have had them for some time and will hold those jobs longer as medical care increases life-span. The log jam of aging and well qualified workers leaves young graduates ground up between lower paying, entry level positions and the necessary financial burden of the cash for diploma education system.

A second point, I find it a disingenuous rhetorical device to label costs that an author thinks undesirable a "tax." Both this paper and recent academic studies on the "ghetto tax" do violence to their message by using a cheap framing trick to label their issue. The practice is anti-thetical to reasoned discussion and better suited to political and commercial advertisment where an author assumes the audience has no decent thought of their own.

Posted by: D. Hirtle | Aug 29, 2006 11:55:47 AM

In response to D. Hirtle - we're obviously in different job markets and/or industries then. My comment was based on the fact that I and some others I personally know of (in the same line of work, with similar job experience) have definitely been discriminated against numerous times in job searches in the past several years if not more (Ie. since the time I passed 35.) For example, when you have 100%+ of the job qualifications, yet aren't even invited in for an interview despite a recruiter saying the company is "desperate" for someone with your experience, there is no other reasonable explanation for the snub than some sort of discrimination.

Posted by: L Logan | Aug 30, 2006 2:07:05 PM