The Unemployment Insurance Taxable Wage Base Mystery
Unemployment insurance experts lament the low Federal taxable wage base (TWB), last increased to $7000 per worker in 1982. The Federal TWB sets only a system minimum and by 2014 all but two states had TWBs that exceeded the minimum, opening up state TWB choice for study. States do align TWB with state payroll earnings. Indeed TWB/WAGE ratios within states have been remarkably stable for decades, though the ratio varies dramatically across states. Critics seem especially concerned about the tax regressivity of low TWBs, but the hypothesis that more progressive states choose less regressive (higher) TWBs is flatly rejected by the data. Earlier UI analysts focused on employer insurance equity, and the resistance of low cost, high-wage (stable) employers to subsidizing high cost, low-wage (unstable) employers. These analysts provided convincing evidence that (i) employers believed this to be the key issue, and (ii) the TWB did redistribute the insurance premium burden in the hypothesized direction. Across states – wage levels constant – economies characterized by greater income inequality and a preponderance of large (low turnover) firms are associated with lower TWBs. Apparently critics were right to imagine a link between wages and the TWB, but ignored the fact that this matching could be done better across location.
|Date of creation:||Jul 2017|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Donald O. Parsons, 1982. "Demographic Effects on Public Charity to the Aged," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 144-152.
- Patricia M. Anderson & Bruce D. Meyer, 1993. "The Unemployment Insurance Payroll Tax and Interindustry and Interfirm Subsidies," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 111-144 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp10893. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.