The Social Security tax is a tax that Congress imposes equally on both employers and employees. Does this mean that the burden of this tax is shared equally between firms and workers? Explain
What will be an ideal response?
No. A tax has the same effect regardless of whether it's imposed on buyers (employers) or sellers (employees). The division of the burden of a tax between firms and workers depends on the elasticities of labor demand and labor supply, not on the tax law. That is, the market for labor, not Congress, decides how the burden of the Social Security tax is divided by firms and workers.
You might also like to view...
When an outcome is weighted by a probability, it becomes an expected value
Indicate whether the statement is true or false
“Cream skimming” usually results in
A. cross-subsidization of markets. B. subsidies to rural consumers of the service. C. regulations to provide universal service. D. monopoly.
When area income increases by 20 percent, _______.
a. quantity demanded rises by 10.0 percent. b. quantity demanded falls by 10.0 percent. c. quantity demanded does not change. d. quantity demanded falls by 7.5 percent. e. quantity demanded rises by 7.5 percent.
Labor hoarding occurs when
A. because of hiring and firing costs, firms retain workers in a recession that they would otherwise lay off. B. involuntary unemployment exceeds voluntary unemployment. C. the unemployment rate exceeds the natural rate of unemployment. D. firms keep good workers so other firms can't hire them.