Most estimates suggest that workers in the United States bear about 80 to 85% of payroll taxes.

(a) Given these values of tax incidence, what can you say about the elasticity of labor supply relative to the elasticity of labor demand?

(b) Policymakers are considering an increase in payroll taxes on just firms. Do you anticipate this policy will be effective in shifting the tax burden to firms?

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a With workers bearing 80 to 85 of payroll taxes it implies that the elasticity ... View the full answer