NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxes and Fringe Benefits Offered by Employers

William M. Gentry, Eric Peress

NBER Working Paper No. 4764
Issued in June 1994
NBER Program(s):   PE

Using cross-sectional data for blue and white collar workers for U.S. cities, we examine how the tax treatment of fringe benefits affects whether employers offer benefits. Differences in state-level income taxes cause variation across places in the tax incentives for fringe benefits. We find that employers respond to tax incentives to offer fringe benefits, especially to blue collar workers. The tax incentives affect both the probability of basic benefits, such as medical coverage, and more 'marginal' benefits, such as vision and dental coverage. Higher taxes also reduce the amount of explicit cost sharing for some benefits between employers and employees.

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