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The Effects of Taxing Unemployment Insurance Benefits Accounting For Induced Labor Supply Responses

  • David M. Betson
  • Jennifer L. Warlick
  • Timothy M. Smeeding
Part of the Policy Studies Organization Series book series (PSOS)

Abstract

Taxation of Unemployment Insurance (UI) benefits has been a topic of debate for more than a decade. Arguments for and against taxation revolve around issues of equity, efficiency, and redistributive objectives. The debate bore fruit in 1979 with the passage of legislation which provides for partial taxation of UI benefits. Because the legislation falls short of total taxation and leaves unsettled most of the analytic issues, this paper adds to this debate by presenting new estimates of tax induced changes in total revenues which account for the potential labor force responses to taxation of UI. Estimates of the impact of full taxation are compared to similar estimates for a world in which UI benefits are totally excluded from the tax base (the recent past), and also to the situation which prevails under current law. New information regarding the income replacement function and work disincentive effects of UI under alternative tax schemes is also presented. All of the estimates are based on data from the Survey of Income and Education (SIE). The method of analysis is microsimulation.

Keywords

Unemployment Insurance Unemployed Worker Income Class Weekly Wage Unemployment Insurance Benefit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Policy Studies Organization 1988

Authors and Affiliations

  • David M. Betson
  • Jennifer L. Warlick
  • Timothy M. Smeeding

There are no affiliations available

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