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

Antoine Bozio, Thomas Breda (), Julien Grenet and Arthur Guillouzouic ()
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Arthur Guillouzouic: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: We analyze earnings responses to six large payroll tax and income tax reforms in France. Our findings indicate full pass-through to workers when there is a strong and transparent link between contributions and expected benefits. In contrast, employer payroll taxes with no tax-benefit linkage exhibit limited pass-through to workers, while income tax nominally borne by employees show nearly full passthrough. Together with a meta-analysis of the literature, we interpret these results as empirical support for the long-standing hypothesis that tax-benefit linkage matters for the incidence of payroll taxes. In the absence of such linkage, our findings suggest that the individual-level incidence of payroll taxes aligns with their statutory incidence.

Keywords: Tax- Benefit Linkage; Statutory incidence; Tax Incidence; Payroll Tax (search for similar items in EconPapers)
Date: 2025-03
New Economics Papers: this item is included in nep-pbe and nep-pub
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02191315v6
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Citations: View citations in EconPapers (4)

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Working Paper: Does Tax-Benefit Linkage Matter for the Incidence of Payroll Taxes? (2025)
Working Paper: Does Tax-Benefit Linkage Matter for the Incidence of Payroll Taxes? (2024)
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