A good understanding of labor supply responses to tax and transfer policies is necessary to achieve the objectives related policies. Income support programs aim to reduce poverty and create a more equitable society. However, labor supply response can derail expected outcomes and must be carefully evaluated for effective policy. Economic theory suggests that as taxes and transfer payments increase, the number of hours and/or the number of employees will decrease (Borjas 2005). The exception is transfer payments with work requirements, where labor supply moves in the same direction as benefits. In the labor market, individuals have two basic choices: how many hours to work (intensive) and whether or not they want to work (extensive). If labor supply elicits broadly intensive responses, certain types of programs, such as food stamps, are more effective, while EITC-type programs are more effective for broad responses. Government tax and transfer policies affect labor supply because when the real wage changes, labor supply responds. This article will examine the response of U.S. labor supply to changes in taxes and transfer payments. It will determine whether the response is concentrated towards intensive or extensive margins and observe the direction and magnitude of changes. Understanding labor supply responses is crucial for governments wanting to achieve their intended policy goals. Labor market behavior can have significant long-term effects on potential output. According to the Congressional Budget Office, the size and quality of the workforce, capital stock, and production efficiency determine a country's potential output. When policies influence relevant factors, such as the size of the labor force, the...... middle of paper ......e to participate at a lower wage than they would typically require. More people working broadens the tax base while reducing the amount of income transferred. The government is able to collect more revenue while ensuring a guaranteed level of income. (Dickert et al. 1995; Browning 1995). EITC-style programs can help the government achieve its goals with minimal negative effects on the economy. Not all labor markets are the same size or the same type of response to government decisions. The direction and magnitude of each response will inform policymakers about optimal decisions. Section II of this article reviews the empirical literature on tax and transfer policies and the labor market. Section III discusses the methodology. Section IV summarizes the results of this study. Section V presents the conclusion and identifies areas requiring further research...