In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent (6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and employee) on the wages of all workers. If the tax were redefined such that the entire 12.4 percent was statutorily levied on employers, economic analysis suggests that the actual burden of the tax would
A) remain unchanged.
B) shift more heavily toward employers.
C) shift more heavily toward employees.
D) be different than if the entire 12.4 percent was statutorily imposed on employees.

Question

Quizplus · Accepted Answer

The actual economic burden of a tax depends on the relative elasticities of supply and demand, not on who is statutorily responsible for paying the tax.

In 2010 the Federal Government Reduced the Social Security Tax