Does Tax-Benefit Linkage Matter for the Incidence of Payroll Taxes?

We study the earnings responses to six large payroll tax and income tax reforms in France. We find evidence of full pass-through to workers in cases where there is a strong and clear relationship between contributions and expected benefits. By contrast, we find a limited pass-through of employer payroll taxes to workers for reforms with no tax-benefit linkage, and close to full pass-through to workers for income tax reforms nominally incident on employees. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage matters for incidence of payroll taxes, a claim long made by the literature but not backed by empirical evidence to date. Absent tax-benefit linkage, our results suggest that the individual-level incidence of payroll taxes aligns with their statutory incidence.