Working Paper: NBER ID: w4764
Authors: William M. Gentry; Eric Peress
Abstract: Using cross-sectional data for blue and white collar workers for U.S. cities, we examine how the tax treatment of fringe benefits affects whether employers offer benefits. Differences in state-level income taxes cause variation across places in the tax incentives for fringe benefits. We find that employers respond to tax incentives to offer fringe benefits, especially to blue collar workers. The tax incentives affect both the probability of basic benefits, such as medical coverage, and more 'marginal' benefits, such as vision and dental coverage. Higher taxes also reduce the amount of explicit cost sharing for some benefits between employers and employees.
Keywords: fringe benefits; tax treatment; employer provided insurance
JEL Codes: H24; H31; I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| state income tax rates (H71) | likelihood of employers offering basic medical insurance (I13) |
| state income tax rates (H71) | likelihood of employers offering vision coverage (J32) |
| state income tax rates (H71) | reduction in explicit cost sharing between employers and employees (J32) |
| state income tax rates (H71) | likelihood of offering life insurance (G52) |