The Tax Base of the U.S. Unemployment Insurance Tax: An Empirical Analysis

In the US, unemployment insurance benefit payments are financed primarily by taxes on employers' payrolls. The base of this tax is, however, not the actual payroll but the taxable payroll. Because of the legal provisions according to which the taxable payroll is computed, precise analytical for...

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Bibliographic Details
Published in:The review of economics and statistics 1980-02, Vol.62 (1), p.32
Main Author: Brechling, Frank
Format: Article
Language:English
Subjects:
Employee turnover
Employment
Extensions
Payroll
Statistical analysis
Tax base
Tax credits
Taxable
Taxes
Unemployment insurance
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Summary:In the US, unemployment insurance benefit payments are financed primarily by taxes on employers' payrolls. The base of this tax is, however, not the actual payroll but the taxable payroll. Because of the legal provisions according to which the taxable payroll is computed, precise analytical formulae for the taxable payroll can be derived but only for certain postulated employment patterns.Expressions are derived for a mean taxable payroll for situations in which data for particular types of individual workers are not available. The results indicate that annual earnings and labor turnover tend to exert a positive influence on the taxable payroll, and the taxable wage base tends to have a positive effect at low values and a negative one at high values. The taxable payroll implies a marginal tax cost of labor turnover which is estimated to reach a maximum when the taxable wage base is set at about one half of annual earnings.
ISSN:0034-6535
1530-9142