payroll_tax

payroll_tax - Payroll Tax individual labor supply curve...

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individual labor supply curve versus market labor supply curve payroll tax - tax levied on firms or workers that is fixed at $x per unit of labor (or per unit of labor hour) Question- Does taxing employers relieve employees of a financial burden that would otherwise fall on them? Who bears the burden of the payroll tax? No Tax $2 Payroll Tax on Firms (demand labor) Market wage Labor Demand Labor Supply Market Wage Demand Supply $10 6 18 $9 8 16 $8 10 14 $8 $7 12 12 $7 $6 14 10 $6 $5 16 8 $5 The tax is levied on firms (demand labor). If the market wage is $8, the firm must pay the worker $8. After the firm pays the worker $8, however, the firm must then also send $2 to the government (because the firm is legally responsible for paying the tax). At the end of the day, then, the firm must pay $10 when the market wage is $8. When the firm must pay $10 at the end of the day, the firm is willing and able to purchase only 6 units of labor. when the payroll tax is levied on
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payroll_tax - Payroll Tax individual labor supply curve...

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