Unemployment insurance financing as a uniform payroll tax

Graves, Sebastian, Hazell, Jonathon ORCID: 0009-0002-4930-7946, Lewis, Walker F. and Patterson, Christina (2022) Unemployment insurance financing as a uniform payroll tax. AEA Papers and Proceedings, 112. 97 - 101. ISSN 2574-0768

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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.

Item Type:	Article
Divisions:	Economics
Subjects:	H Social Sciences > HJ Public Finance H Social Sciences > HB Economic Theory
JEL classification:	E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H75 - State and Local Government: Health, Education, and Welfare J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J63 - Turnover; Vacancies; Layoffs J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J65 - Unemployment Insurance; Severance Pay; Plant Closings
Date Deposited:	02 Apr 2025 11:54
Last Modified:	02 Apr 2025 13:30
URI:	http://eprints.lse.ac.uk/id/eprint/127793

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