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Unemployment Insurance Financing as a Uniform Payroll Tax

Author

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  • Sebastian Graves
  • Jonathon Hazell
  • Walker F. Lewis
  • Christina Patterson

Abstract

In the United States, unemployment insurance (UI) is financed by taxes levied on employers. We develop a model to decompose UI taxes into a firing tax component levied on firms that lay off workers, and a uniform payroll tax component levied on all firms regardless of their layoffs. We develop a novel methodology to measure the two components and document a number of facts about the uniform payroll tax component: it is large, accounting for just under half of UI taxes; it rises significantly after recessions; and it is more cyclical in states with poorly funded UI systems.

Suggested Citation

  • Sebastian Graves & Jonathon Hazell & Walker F. Lewis & Christina Patterson, 2022. "Unemployment Insurance Financing as a Uniform Payroll Tax," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 97-101, May.
    • Handle: RePEc:aea:apandp:v:112:y:2022:p:97-101
    DOI: 10.1257/pandp.20221072
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    References listed on IDEAS

    as
    1. Emmanuel Saez & Benjamin Schoefer & David Seim, 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," American Economic Review, American Economic Association, vol. 109(5), pages 1717-1763, May.
    2. Card, David & Levine, Phillip B., 1994. "Unemployment insurance taxes and the cyclical and seasonal properties of unemployment," Journal of Public Economics, Elsevier, vol. 53(1), pages 1-29, January.
    3. Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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