Abstract
This paper computes the expected present value of Social Security retirement benefits and taxes for households of different marital circumstances, incomes, and age cohorts. Also computed are the net gain or loss from participation in the system, the expected internal rate of return it offers various participants, and the marginal linkage between benefits and contributions. All computations are made for the 1985 Social Security and income tax laws. The general results are that Social Security offers vastly different terms to households in different circumstances. The net gain or loss varies by $ 200,000 and the real internal rate of return on contributions ranges from negative numbers to 6.3 percent for households of different ages, income levels, and marital status. These differences are far greater than the widely debated distributional effects of relevant income tax alternatives. We also find that there is a great deal of variance in the marginal linkage of benefits and taxes with most households facing a situation where the incremental present value of benefits is only zero to thirty cents per extra dollar of taxes paid.
Submitted Version (Free)
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.