What Are the Economic and Labour Market Effects of an Income Tax Reduction Targeted at Older Workers?
Table 8
Impact of a 10% permanent and temporary reduction in earned income taxes for workers aged 60 and over when the intertemporal rate of substitution increased, key macroeconomic indicators*.
Macroeconomic indicators
Permanent
Temporary
2010
2030
2050
2010
2030
2050
Real GDP per capita
0.06 (−0.02)
0.06 (0.01)
0.10 (0.00)
0.09 (0.01)
0.19 (0.01)
0.07 (0.00)
Labour supply/capita
0.11 (−0.02)
0.18 (0.00)
0.29 (0.01)
0.13 (0.01)
0.24 (0.00)
0.04 (−0.01)
National savings
−0.25 (0.04)
−0.20 (−0.06)
−0.23 (0.02)
−0.19 (0.00)
0.25 (0.04)
0.16 (0.01)
Capital stock/capita
−0.06 (−0.01)
−0.29 (0.03)
−0.47 (0.00)
−0.03 (0.00)
0.05 (−0.03)
0.15 (−0.01)
Capital/labour ratio
−0.18 (0.01)
−0.54 (0.03)
−0.92 (0.01)
−0.18 (−0.02)
−0.25 (−0.04)
0.11 (0.00)
Real wages
−0.05 (0.00)
−0.14 (0.01)
−0.24 (0.00)
−0.05 (0.00)
−0.07 (−0.01)
0.03 (0.00)
Earned income tax rate
−0.13 (0.00)
−0.13 (0.00)
−0.14 (0.00)
−0.13 (0.00)
−0.15 (0.00)
−0.01 (0.00)
*Percentage point difference against the reference scenario. Values in brackets are differences compared to the first scenario. See Tables 3 and 5. The inter-temporal rate of substitution in the general equilibrium model is increased from 0.9 to 1.1.
