Working Paper: NBER ID: w10043
Authors: Patricia M. Anderson; Bruce D. Meyer
Abstract: We examine the distributional consequences of the UI payroll tax using representative individual microdata. We calculate taxes paid by individual wage and individual and household income deciles, incorporating the effects of multiple job holding and turnover. This tax distribution is compared with the distribution of UI benefits and benefits net of taxes, as well as to the burdens imposed by the federal income tax. We conclude that the UI payroll tax is indeed quite regressive. Within the context of the regular UI program, this regressivity is offset by the progressive nature of benefits, leaving the net benefit distribution progressive. We simulate a revenue-neutral increase to the OASDI level of the taxable wage base. The share of total UI taxes paid becomes fairly equal, and net benefits become positive across more deciles. Finally, we examine the effect of providing family leave within the UI system as recently proposed. We find that the share of such benefits going to relatively high-income groups is likely to be much larger than is the case for regular UI benefits.
Keywords: No keywords provided
JEL Codes: H2; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| UI payroll tax (H29) | regressivity for low-wage workers (J38) |
| revenue-neutral increase in taxable wage base (H29) | more equitable distribution of tax burdens and benefits (H23) |
| family leave benefits within UI system (J65) | disproportionately higher-income groups receive benefits (H53) |
| regressivity for low-wage workers (J38) | net benefit distribution is progressive (D39) |