Payroll Tax Incidence: Evidence from Unemployment Insurance

Audrey Guo

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Economic models assume that payroll tax burdens fall fully on workers, but where does tax incidence fall when taxes are firm-specific and time-varying? Unemployment insurance in the United States has the key feature of varying both across employers and over time, creating the potential for labor demand responses if tax costs cannot be fully passed through to worker wages. Using state policy changes and administrative data of matched employer-employee job spells, I study how employment and earnings respond to unexpected payroll tax increases for highly exposed employers. I find significant drops in employment growth driven by lower hiring, and minimal evidence of passthrough to earnings. The negative employment effects are strongest for young workers and single-establishment firms.

Keywords: unemployment insurance; labor demand; payroll taxation (search for similar items in EconPapers)
JEL-codes: H25 H71 J23 J65 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2024-06
New Economics Papers: this item is included in nep-lab, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www2.census.gov/library/working-papers/2024/adrm/ces/CES-WP-24-35.pdf First version, 2024 (application/pdf)

Related works:
Journal Article: Payroll tax incidence: Evidence from unemployment insurance (2024)
Working Paper: Payroll Tax Incidence: Evidence from Unemployment Insurance (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:24-35

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