The burden of the payroll tax falls entirely on the employee regardless of how it is formally divided between employer and employee if the
A)demand for labor is inelastic.
B)supply of labor curve is horizontal.
C)supply of labor curve is virtually vertical.
D)demand for labor curve is elastic.

Question

Quizplus · Accepted Answer

The burden of the payroll tax falls entirely on the employee when the supply of labor curve is virtually vertical. This means that the employee has little to no bargaining power in determining their wage rate and will have to accept any tax burden imposed on them by the government. In contrast, if the demand for labor is inelastic or the demand for labor curve is steep, the employer may absorb some of the tax burden by reducing their profit margins or passing on the tax to consumers in the form of higher prices.

The Burden of the Payroll Tax Falls Entirely on the Employee