Unemployment Insurance Financing as a Uniform Payroll Tax

Sebastian Graves, Jonathon Hazell, Walker F. Lewis and Christina Patterson

AEA Papers and Proceedings, 2022, vol. 112, 97-101

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.

JEL-codes: E32 H25 H75 J63 J64 J65 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Unemployment Insurance Financing As A Uniform Payroll Tax (2022)
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DOI: 10.1257/pandp.20221072

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