Federal Reserve Bank of Atlanta
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Atlanta, GA 30309
Institutional Affiliation: Boston University and Federal Reserve Bank of Atlanta
NBER Working Papers and Publications
|May 2020||Marginal Net Taxation of Americans’ Labor Supply|
with , , , : w27164
The U.S. has a plethora of federal and state tax and benefit programs, each with its own work incentives and disincentives. This paper uses the Fiscal Analyzer (TFA) to assess how these policies, in unison, impact work incentives. TFA is a life-cycle, consumption-smoothing program that incorporates household borrowing constraints and all major federal and state fiscal policies. We use TFA in conjunction with the 2016 Federal Reserve Survey of Consumer Finances to calculate Americans’ remaining lifetime marginal net tax rates. Our findings are striking. One in four low-wage workers face marginal net tax rates above 70 percent, effectively locking them into poverty. Over half face remaining lifetime marginal net tax rates above 45 percent. The richest 1 percent also face a high median lifeti...