Question

In: Economics

Consider a social insurance program that is financed by a payroll tax. How does the incidence...

Consider a social insurance program that is financed by a payroll tax. How does the incidence of this tax differ if the benefits of the insurance program are restricted to workers, rather than if the benefits are available to all citizens? Under what circumstances will these differences be particularly large?

Solutions

Expert Solution

Solution -

Pay roll tax is given to the workers by the salaried companies. In this way, one of the programs which are limited to workers is a strong tax-benefit link. In that case, the tax affects every worker (changing the demand curve) to lesser workers for less workers but the workers' willing to accept lesser wages are affected because they benefit from the funding program through the salaried tax (supply) changes the curve as well.Both of these results are less under labor pressure, so instead of reducing the level of workers in taxation cases, workers are transferred to workers in lesser form.

If all the benefits are available through tax to the citizen, then there will be no suitable shift in the supply of labor work (because the workers will not have any additional benefit), therefore the minimum loss will be higher but the wages will not be reduced.Workers do not tolerate much of taxation when there is no profit with the performance status.

The benefits provided are the difference by the response to labor supply. If the labor wages do not respond to the new benefits by reducing the wage and will not be less responsive to the new benefits, then the lesser labor will be less able to pay the tax on the entire expenditure of the workers. On the other hand, if the beneficiaries benefit from subsidized subsidized wages, they will be more willing to accept lower wages instead of getting benefits.

In this way, the difference between these two programs will be particularly large when the benefits are considered by the workers or workers are more likely to be the beneficiaries of the benefits.


Related Solutions

What is meant by the term tax incidence? How does elasticity affect tax incidence? How does...
What is meant by the term tax incidence? How does elasticity affect tax incidence? How does elasticity affect deadweight loss?
How does "elasticity" affect "tax incidence"?
How does "elasticity" affect "tax incidence"?
What is meant by tax incidence? How does this concept apply to who actually pays a...
What is meant by tax incidence? How does this concept apply to who actually pays a sales tax? Illustrate your answer graphically to show how a sales tax can be evaluated.
4.) What is tax incidence? How does it relate to price elasticity of supply/demand? How might...
4.) What is tax incidence? How does it relate to price elasticity of supply/demand? How might understanding tax incidence be important when evaluating public policy proposals?
What is tax incidence? How does it relate to price elasticity of supply/demand? How might understanding...
What is tax incidence? How does it relate to price elasticity of supply/demand? How might understanding tax incidence be important when evaluating public policy proposals?
It is a common misconception that the incidence of a tax (i.e., how the burden of...
It is a common misconception that the incidence of a tax (i.e., how the burden of the tax is actually divided between consumers and producers) depends on who is legally responsible for paying the tax to the government. [2 points] Briefly explain why the legal assignment of the tax does not determine the real incidence of the tax. For example, if the government collects the tax entirely from producers (it does not collect any taxes from consumers), how do consumers...
The personal income tax, corporate income tax, and contributions to social insurance (Medicare and Social Security)...
The personal income tax, corporate income tax, and contributions to social insurance (Medicare and Social Security) together makes up approximately ______ of all federal government tax revenues annually (based on annual data from the period 2010-2015.) A. 95% B. 65% C. 45% D. 15% E. 4.5%
The NDP propose a trial tax-increase program. Under this trial the social-insurance numbers (SINs) of all...
The NDP propose a trial tax-increase program. Under this trial the social-insurance numbers (SINs) of all super-rich Ontario residents are placed in a barrel, and a random sample of 1200 of them is selected (assume there are a total of 6000 super-rich Ontario residents) for taxation at the higher rate. The tax-income earned from this program will depend on the total income earned by the 1200 sampled residents. (note: that if the sample consisted of just two individuals, with earnings...
{incidence, social insurance} Who provides most of the care for elderly people who need assistance with...
{incidence, social insurance} Who provides most of the care for elderly people who need assistance with the daily tasks of living? How do these helpers get paid??
Tax Incidence: How do the effects of a tax differ between markets with different elasticities of...
Tax Incidence: How do the effects of a tax differ between markets with different elasticities of supply? Consider two hypothetical markets. In both cases, the demand function is QD = 1000 - P The two supply functions are QS1 = P - 100 and QS2 = 2P - 650 a. Solve for equilibrium price and quantity for both cases and show that the equilibrium values are the same in these two cases (for QS1 and QD and for QS2 and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT