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

  • Patricia M. Anderson
  • Bruce D. Meyer

We examine the distributional consequences of the Unemployment Insurance (UI) payroll tax. Applying the ability-to-pay principle of equity, the UI payroll tax is quite regressive, while applying the benefits principle makes the UI program look quite good. We then simulate a revenue-neutral increase of the UI tax base to the OASDI tax base level, which appears equity-enhancing under the ability-to-pay principle, but has mixed effects under the benefits principle. Finally, providing family leave within the UI system would maintain the regressivity that violates the ability-to-pay principle of equity, but would agree much better with the benefits principle.

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Paper provided by Harris School of Public Policy Studies, University of Chicago in its series Working Papers with number 0601.

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Date of creation: Dec 2005
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Handle: RePEc:har:wpaper:0601
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  1. repec:tpr:qjecon:v:112:y:1997:i:3:p:913-37 is not listed on IDEAS
  2. Robert Hutchens, 1981. "Distributional equity in the unemployment insurance system," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(3), pages 377-385, April.
  3. Bound, John & Brown, Charles & Mathiowetz, Nancy, 2001. "Measurement error in survey data," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 59, pages 3705-3843 Elsevier.
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