TY  - JOUR
AU  - Hoynes,Hilary Williamson
AU  - Moffitt,Robert
TI  - Tax Rates and Work Incentives in the Social Security Disability Insurance Program: Current Law and Alternative Reforms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6058
PY  - 1997
Y2  - June 1997
UR  - http://www.nber.org/papers/w6058
L1  - http://www.nber.org/papers/w6058.pdf
N1  - Author contact info:
Hilary W. Hoynes
Department of Economics
University of California, Davis
One Shields Ave.
Davis, CA  95616-8578
Tel: 530/564-0505
Fax: 530/752-9382
E-Mail: hwhoynes@ucdavis.edu

Robert A. Moffitt
Department of Economics
Johns Hopkins University
3400 North Charles Street
Baltimore, MD  21218
Tel: 410/516-7611
Fax: 410/516-7600
E-Mail: moffitt@jhu.edu
AB  - The Social Security Disability Insurance (SSDI) Program has long been criticized by economists for its apparent work disincentives stemming from the imposition of 100-percent tax rates on earnings.  However, the program has been modified in recent years to allow recipients to keep some of their earnings for fixed periods of time.  Moreover, additional proposals have been made for lowering the tax rate further and for providing various additional financial work incentives.  We use the basic labor supply model to show the expected effect of these reforms on work effort.  In addition, we provide a numerical simulation that shows the magnitude of the monetary incentives provided by the reforms for different categories of individuals.  We find that the proposed reforms have ambiguous effects on work effort and could, contrary to perceived wisdom, possibly reduce work effort and increase the number of SSDI recipients.  However, the simulations show that reforms based on earnings subsidies for private employers are more likely to increase work effort and to lower the caseload.
ER  -