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Payroll tax incidence when the tax varies by jurisdiction: The case of the U.S. unemployment insurance tax

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  • Kevin Murphy

Abstract

Standard treatment of payroll tax incidence suggests that labor, both because of inelastic supply and because workers value the benefit financed by the tax, bears most of the tax. This note considers the special case of the U.S. unemployment insurance tax, which is a payroll tax that varies by jurisdiction (states). The model set forth in this paper allows for differing degrees of both labor mobility and substitutability between types of labor and capital. Contrary to the standard treatment, this paper predicts that some types of labor will avoid this particular type of payroll tax completely. Copyright Springer 2006

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  • Kevin Murphy, 2006. "Payroll tax incidence when the tax varies by jurisdiction: The case of the U.S. unemployment insurance tax," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 30(2), pages 198-204, June.
    • Handle: RePEc:spr:jecfin:v:30:y:2006:i:2:p:198-204
    DOI: 10.1007/BF02761485
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    References listed on IDEAS

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    1. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 72-101, July.
    2. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April.
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