  Economic models assume that payroll tax burdens fall fully on workers, but
where does tax incidence fall when taxes are firm-specific and time-varying?
Unemployment insurance in the United States has the key feature of varying both
across employers and over time, creating the potential for labor demand
responses if tax costs cannot be fully passed on to worker wages. Using state
policy changes and matched employer-employee job spells from the LEHD, I study
how employment and earnings respond to payroll tax increases for highly exposed
employers. I find significant drops in employment growth driven by lower
hiring, and minimal evidence of pass-through to earnings. The negative
employment effects are strongest for young and low-earning workers.
