Pension Policy Adviser to the
Kosovo Ministry of Economy and Finance
Institutional Affiliation: Kosovo Ministry of Economy and Finance
NBER Working Papers and Publications
|August 2002||Does It Pay to Work?|
with Jagadeesh Gokhale, Laurence J. Kotlikoff: w9096
Does it pay to work? Given the number and complexity of federal and state tax and transfer systems, this is a tough question to answer. The problem is greatly compounded by the fact that what one earns in one year alters not just current taxes and transfer payments in that year, but in future years as well. Thus, understanding the net effective tax on work and the changes in this taxation associated with policy reforms requires an intertemporal model capable of carefully determining tax and transfer payments at each stage of the life cycle. This study uses ESPlanner, a financial planning software program, to study the net work tax levied on workers with different earnings capacities. ESPlanner smooths households' living standards subject to their capacities to borrow. In so doing, it ma...