Does statutory incidence matter? Earnings responses to social security contributions
This paper provides evidence that the statutory incidence of taxes can play an important role in determining the behaviour of taxpayers. Using administrative data for Ireland, we nd that short-run earnings responses to social security contributions are stronger when formally levied on employees rather than employers. This is despite both taxes being remitted by employers, and goes against the prediction of standard economic models that predict the irrelevance of statutory incidence.