21Taxes on Labor Supply（课件）- 《财政与金融》同步教学（人民大学·第五版）

21 21.1 Taxation and Labor Supply—Theory 21.2 Taxation and Labor Supply—Evidence 21.3 Tax Policy to Promote Labor Supply: The Earned Income Tax Credit 21.4 The Tax Treatment of Child Care and Its Impact on Labor Supply 21.5 Conclusion Taxes on Labor Supply 1 of 35 1 21 Introduction Between 1987 and 1988, Iceland overhauled its tax system. During the transition to this new system, workers paid taxes on their 1986 income in 1987, and paid taxes on their 1988 income in 1988. Their 1987 income thus was never taxed! Did this radical change in the tax burden actually affect workers’ decisions about how many hours to work? Bianchi, Gudmundsson, and Zoega et al (2001) investigated this issue by examining the response of Icelandic workers to this one-year “tax holiday,” and they found large effects on labor supply and economic growth. of 35 C H A P T E R 2 1 ■ T A X E S O N L A B O R S U P P L Y 2 21 Iceland’s Tax Overhaul Overall employment spiked in 1987 from 78% to 85%. of 35 C H A P T E R 2 1 ■ T A X E S O N L A B O R S U P P L Y 3 21 Introduction On average, each 1% rise in after-tax wages led workers to work 0.4% more weeks than they had previously. Real GDP also leapt from an annual growth rate of 4.3% to 8.5%. The effects were, however, transitory. By 1988, these figures had dropped back to levels comparable to the pre-tax-reform levels. This striking response to a change in tax policy shows that taxes can have effects on important decisions, such as how much to work. of 35 C H A P T E R 2 1 ■ T A X E S O N L A B O R S U P P L Y 4 21.1 The theoretical framework for assessing how income taxes affect labor supply is the same as that used to model the effect of cash welfare on labor supply. Ava trades off consumption (which requires work) against leisure. Each hour of leisure costs Ava her wage, $12.50, in foregone consumption, so the slope of her budget constraint is −12.5. A 30% tax rate alters this trade-off. The slope of Ava’s budge