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4. Evidence from studies about the economic incidence of taxation in the labor market suggests that more than 50% of payroll taxes are paid by
4. Evidence from studies about the economic incidence of taxation in the labor market suggests that more than 50% of payroll taxes are paid by workers and less than 50% of payroll taxes are paid by employers. Draw a market for labor showing a case where workers would bear more than 50% of the burden of the payroll tax. Explain in words how your graph shows that workers would bear more than 50% of the tax burden. Is your supply curve or demand curve for labor relatively more price inelastic? Although payroll taxes are typically assessed as a percentage of earnings, to make this question easier and to match our "tax per-unit" approach, represent the payroll tax as a fixed amount per hour of work and assume that it is statutorily imposed on businesses (demanders of labor)
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