To pay for health care reforms,suppose a new payroll tax is levied on employers.The economic burden of the new tax will fall:

Question

Quizplus · Accepted Answer

The economic burden of the new payroll tax will fall more heavily on workers the more inelastic is the labor supply curve. Inelastic labor supply means that workers are less able to adjust their labor supply in response to changes in wages or taxes. Therefore, when employers are forced to pay a new payroll tax, they are likely to shift some of the burden onto workers by reducing their wages or benefits. This will have a greater impact on workers with less elastic labor supply, as they will have less ability to find alternative employment options or negotiate higher wages. Therefore, the more inelastic the labor supply curve, the greater the burden on workers.

To Pay for Health Care Reforms,suppose a New Payroll Tax