Unemployment Insurance Financing as a Uniform Payroll Tax
AEA Papers and Proceedings
vol. 112,
May 2022
(pp. 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.Citation
Graves, Sebastian, Jonathon Hazell, Walker F. Lewis, and Christina Patterson. 2022. "Unemployment Insurance Financing as a Uniform Payroll Tax." AEA Papers and Proceedings, 112: 97-101. DOI: 10.1257/pandp.20221072Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- J63 Labor Turnover; Vacancies; Layoffs
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings