The current payroll tax is 7.65% on both employers and employees (as of 2013). Who do you think bears the economic burden of this payroll tax-firms or workers? Why? Using the tax incidence approach, support your answers using economic principles.
How does the economic burden shift when the unemployment rate is 5%, as contrasted to an unemployment rate of 9%? Explain.
In your analysis, does it make any difference on this division of the tax burden between workers and firms if the government levies the tax on workers, levies the tax on firms, or divides the tax between the two groups? Why or why not?