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Does Tax-Benefit Linkage Matter for the Incidence of Payroll Taxes?

Antoine Bozio¹; Thomas Breda²; Julien Grenet²; Arthur Guillouzouic³

¹ École des Hautes Études en Sciences Sociales (EHESS) and Paris School of Economics (PSE) , Paris , · ² Centre National de la Recherche Scientifique (CNRS) and Paris School of Economics (PSE) , Paris , · ³ Centre National de la Recherche Scientifique (CNRS), Aix-Marseille School of Economics (AMSE), and Paris School of Economics (PSE), Marseille ,

Abstract We analyse earnings responses to six large payroll tax and income tax reforms in France. Our findings indicate full pass-through to workers when there is a strong and transparent link between contributions and expected benefits. In contrast, employer payroll taxes with no tax-benefit linkage exhibit limited pass-through to workers, while income tax nominally borne by employees show nearly full pass-through. Together with a meta-analysis of the literature, we interpret these results as empirical support for the long-standing hypothesis that tax-benefit linkage matters for the incidence of payroll taxes. In the absence of such linkage, our findings suggest that the individual-level incidence of payroll taxes aligns with their statutory incidence.

DOI

10.1093/restud/rdaf059

Volume

93 (3)

Pages

1536-1573

Language

en

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BibTeX

Sources

crossref openalex