Unemployment Insurance Tax Burdens and Benefits: Funding Family Leave and Reforming the Payroll Tax

32 Pages Posted: 3 Nov 2003 Last revised: 26 Jun 2010

See all articles by Patricia M. Anderson

Patricia M. Anderson

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Bruce D. Meyer

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; National Bureau of Economic Research (NBER)

Date Written: October 2003

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.

Suggested Citation

Anderson, Patricia M. and Meyer, Bruce D., Unemployment Insurance Tax Burdens and Benefits: Funding Family Leave and Reforming the Payroll Tax (October 2003). NBER Working Paper No. w10043. Available at SSRN: https://ssrn.com/abstract=461364

Patricia M. Anderson (Contact Author)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-646-2532 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Bruce D. Meyer

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States
(773) 702-2712 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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