Reducing payroll tax benefits workers and employers equally.

True or False? Draw a graph (such as supply and demand diagrams) to support your answer:

Expert Solution

False

It will depend on the elasticity of the supply and demand curve of the labor how much the tax burden will be on the employer and the worker.

So, you may think that the tax is imposed on the workers, then demand curve will shift to the left and if the tax is imposed on the employer, then the supply curve will shift to the left. Here is the diagram for $1 payroll tax where the burden depends on the slope (elasticity) of the supply and demand curve. It is not necessarily equal.

Rahul Sunny answered 2 years ago

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Question

Reducing payroll tax benefits workers and employers equally.

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