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Unemployment Insurance Tax Burdens and Benefits: Funding Family Leave and Reforming the Payroll Tax

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  • Anderson, Patricia M.
  • Meyer, Bruce D.

Abstract

We examine the distributional consequences of the Unemployment Insurance (UI) payroll tax. Applying the ability–to–pay principle of equity, the UI payroll tax is quite regressive, while applying the benefits principle makes the UI program look quite good. We then simulate a revenue–neutral increase of the UI tax base to the OASDI tax base level, which appears equity–enhancing under the ability–to–pay principle, but has mixed effects under the benefits principle. Finally, providing family leave within the UI system would maintain the regressivity that violates the ability–to–pay principle of equity, but would agree much better with the benefits principle.

Suggested Citation

  • Anderson, Patricia M. & Meyer, Bruce D., 2006. "Unemployment Insurance Tax Burdens and Benefits: Funding Family Leave and Reforming the Payroll Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(1), pages 77-95, March.
    • Handle: RePEc:ntj:journl:v:59:y:2006:i:1:p:77-95
    DOI: 10.17310/ntj.2006.1.04
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    1. Bound, John & Brown, Charles & Mathiowetz, Nancy, 2001. "Measurement error in survey data," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 59, pages 3705-3843, Elsevier.
    2. Robert Hutchens, 1981. "Distributional Equity in the Unemployment Insurance System," ILR Review, Cornell University, ILR School, vol. 34(3), pages 377-385, April.
    3. Patricia M. Anderson & Bruce D. Meyer, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 913-937.
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    Cited by:

    1. Audrey Guo & Andrew C. Johnston, 2021. "The Finance of Unemployment Compensation and Its Consequences," Public Finance Review, , vol. 49(3), pages 392-434, May.
    2. Catalina Amuedo‐Dorantes & Jean Kimmel, 2009. "Moonlighting Over The Business Cycle," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 754-765, October.
    3. Guo, Audrey & Johnston, Andrew C., 2020. "The Finance of Unemployment Compensation and its Consequence for the Labor Market," IZA Discussion Papers 13330, Institute of Labor Economics (IZA).
    4. Amuedo-Dorantes, Catalina & Kimmel, Jean, 2005. "Moonlighting Behavior over the Business Cycle," IZA Discussion Papers 1671, Institute of Labor Economics (IZA).
    5. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," NBER Working Papers 15181, National Bureau of Economic Research, Inc.
    6. Christopher J. O’Leary & Burt S. Barnow & Karolien Lenaerts, 2020. "Lessons from the American federal‐state unemployment insurance system for a European unemployment benefits system," International Social Security Review, John Wiley & Sons, vol. 73(1), pages 3-34, January.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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