Recent Marginal Labor Income Tax Rate Changes by Skill and Marital Status
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This paper calculates monthly time series for the overall safety net’s statutory marginal labor income tax rate as a function of skill and marital status. Marginal tax rates increased significantly for all groups between 2007 and 2009, and dramatically so for unmarried household heads. The relationship between incentive changes and skill varies by marital status. Unemployment insurance and related expansions contribute to the patterns by skill while food stamp expansions contribute to the patterns by marital status. Remarkably, group changes in hours worked per capita line up with the statutory measures of incentive changes.
I appreciate conversations with Gary Becker, Jeff Brown, Christian Ferrada, Elizabeth Lower-Basch, Bruce Meyer, and Rob Shimer, seminar participants at the University of Chicago, UC-Irvine, and the 2012 Tax Policy and the Economy Conference, and the research assistance of Sophie Wang. I also appreciate the financial support of the George J. Stigler Center for the Study of the Economy and the State.