One of the main points in the ComingTogether Plan is that means testing of benefits reduces the incentive for productive work, and therefore should be eliminated. Recently, two nationally known think tanks have joined us in expressing this concern. Hoover Institution fellow John Cochrane published a blog post making this very point on May 25, 2023. The Goodman Institute published an editorial in Forbes on June 1, 2023. It is publicly available on the Goodman Institute website here.
The Goodman piece makes reference to a paper by David Altig, Alan J. Auerbach, Laurence J. Kotlikoff, Elias Ilin, and Victor Ye that is similar to the “disincentive” analysis on our website, but is newer and much more comprehensive: Marginal Net Taxation of Americans’ Labor Supply. The authors use our methodology of treating loss of benefits the same as a tax and calculating a marginal tax rate based upon the combination of actual taxes and lost benefits associated with increased income. This new paper takes the analysis much further to look at long term effects. The paper gets rather technical, but read at least the Abstract, the Introduction, and the Conclusion. These sections particularly make clear the excessive complexity in our system of government benefits and taxation.
In the current situation with so many able-bodied, working-aged adults not participating in the work force, we really need to understand why that is the case and change the incentives so that more people are productive.
Support for Ending Means Testing
Tuesday, June 13th, 2023One of the main points in the ComingTogether Plan is that means testing of benefits reduces the incentive for productive work, and therefore should be eliminated. Recently, two nationally known think tanks have joined us in expressing this concern. Hoover Institution fellow John Cochrane published a blog post making this very point on May 25, 2023. The Goodman Institute published an editorial in Forbes on June 1, 2023. It is publicly available on the Goodman Institute website here.
The Goodman piece makes reference to a paper by David Altig, Alan J. Auerbach, Laurence J. Kotlikoff, Elias Ilin, and Victor Ye that is similar to the “disincentive” analysis on our website, but is newer and much more comprehensive: Marginal Net Taxation of Americans’ Labor Supply. The authors use our methodology of treating loss of benefits the same as a tax and calculating a marginal tax rate based upon the combination of actual taxes and lost benefits associated with increased income. This new paper takes the analysis much further to look at long term effects. The paper gets rather technical, but read at least the Abstract, the Introduction, and the Conclusion. These sections particularly make clear the excessive complexity in our system of government benefits and taxation.
In the current situation with so many able-bodied, working-aged adults not participating in the work force, we really need to understand why that is the case and change the incentives so that more people are productive.
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