What Are the Economic and Labour Market Effects of an Income Tax Reduction Targeted at Older Workers?
Table 9
Impact of a 10% permanent and temporary reduction in earned income taxes for workers aged 60 funded through a lump-sum tax, key macroeconomic indicators*.
Macroeconomic indicators
Permanent
Temporary
2010
2030
2050
2010
2030
2050
Real GDP per capita
0.17 (0.09)
0.19 (0.14)
0.21 (0.11)
0.18 (0.10)
0.36 (0.16)
0.09 (0.02)
Labour supply/capita
0.27 (0.14)
0.34 (0.16)
0.42 (0.12)
0.27 (0.15)
0.41 (0.17)
0.06 (0.01)
National savings
−0.24 (−0.05)
0.16 (0.31)
−0.23 (0.02)
−0.27 (−0.08)
0.18 (−0.03)
0.15 (0.00)
Capital stock/capita
−0.03 (−0.02)
−0.17 (0.15)
−0.41 (0.06)
−0.06 (−0.03)
0.20 (0.12)
0.21 (0.05)
Capital/labour ratio
−0.33 (−0.17)
−0.32 (−0.11)
−0.01 (−0.10)
−0.35 (−0.19)
−0.30 (−0.09)
0.09 (0.03)
Real wages
−0.10 (−0.05)
−0.11 (−0.03)
−0.14 (−0.03)
−0.10 (−0.05)
−0.04 (−0.02)
0.04 (0.01)
*Percentage point difference against the reference scenario. Values in brackets are differences compared to the scenarios in which the tax reduction is financed through increases in the earned income tax rate for worker under the age of 60.
