The FICA tax falls most heavily on workers because the price elasticity of demand for labor is greater than the price elasticity of supply of labor.

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Price elasticity of demand for labor refers to the extent to which the demand for labor changes in response to changes in the wage rate, while price elasticity of supply of labor refers to the extent to which the supply of labor changes in response to changes in the wage rate. The FICA tax, which includes Social Security and Medicare taxes, is paid by workers as a percentage of their wages. Because the demand for labor is generally more sensitive to changes in the wage rate than the supply of labor, the burden of the FICA tax falls more heavily on workers than employers.

The FICA Tax Falls Most Heavily on Workers Because the Price