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Corporate taxes and union wages in the United States

Author

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  • Alison Felix
  • James R. Hines

Abstract

This paper evaluates the effect of U.S. state corporate income taxes on union wages. American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, reflecting that unions and employers share tax savings associated with low tax rates. In 2000 the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate is associated with a 0.36 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alison Felix & James R. Hines, 2009. "Corporate taxes and union wages in the United States," Regional Research Working Paper RRWP 09-02, Federal Reserve Bank of Kansas City.
  • Handle: RePEc:fip:fedkrr:rrwp09-02
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    File URL: http://www.kansascityfed.org/Publicat/RegionalRWP/RRWP09-02.pdf
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    References listed on IDEAS

    as
    1. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2005. "Wages and International Rent Sharing in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 73-84, February.
    2. Bernt Bratsberg & James F. Ragan Jr., 2002. "Changes in the Union Wage Premium by Industry," ILR Review, Cornell University, ILR School, vol. 56(1), pages 65-83, October.
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    8. John W. Budd & Matthew J.Slaughter, 2000. "Are Profits Shared Across Borders? Evidence on International Rent Sharing," NBER Working Papers 8014, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Liu, Li & Altshuler, Rosanne, 2013. "Measuring the Burden of the Corporate Income Tax Under Imperfect Competition," National Tax Journal, National Tax Association, vol. 66(1), pages 215-237, March.
    2. Clemens Fuest & Andreas Peichl & Sebastian Siegloch, 2012. "Which Workers Bear the Burden of Corporate Taxation and Which Firms Can Pass It On? Micro Evidence from Germany," Working Papers 1216, Oxford University Centre for Business Taxation.
    3. Clemens Fuest & Li Liu, 2015. "Does Ownership Affect the Impact of Taxes on Firm Behavior? Evidence from China," CESifo Working Paper Series 5316, CESifo Group Munich.
    4. Emmanuel Saez & Benjamin Schoefer & David Seim, 2017. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," NBER Working Papers 23976, National Bureau of Economic Research, Inc.
    5. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2016. "Wages and International Tax Competition," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 893-923, November.
    6. Colacchio, Giorgio, 2014. "Taxation, income redistribution and debt dynamics in a seven-equation model of the business cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 140-165.
    7. repec:aea:aecrev:v:108:y:2018:i:2:p:393-418 is not listed on IDEAS
    8. Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2012. "The direct incidence of corporate income tax on wages," European Economic Review, Elsevier, vol. 56(6), pages 1038-1054.
    9. repec:clh:resear:v:10:y:2017:i:6 is not listed on IDEAS
    10. Thomas K. Bauer & Tanja Kasten & Lars-H. R. Siemers, 2017. "Business Taxation and Wages: Redistribution and Asymmetric Effects," Volkswirtschaftliche Diskussionsbeiträge 182-17, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    11. Clemens Fuest & Andreas Peichl & Sebastian Siegloch, 2018. "Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany," American Economic Review, American Economic Association, vol. 108(2), pages 393-418, February.
    12. John T. Addison & Pedro Portugal & Hugo Vilares, 2015. "Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models," Working Papers w201512, Banco de Portugal, Economics and Research Department.
    13. Timothy J. Goodspeed, 2012. "The Incidence of Bank Regulations and Taxes on Wages: Evidence from US States," CESifo Working Paper Series 4026, CESifo Group Munich.
    14. Fuest, Clemens & Peichl, Andreas & Siegloch, Sebastian, 2015. "Do Higher Corporate Taxes Reduce Wages?," IZA Discussion Papers 9606, Institute for the Study of Labor (IZA).
    15. Jennifer C. Gravelle, 2011. "Corporate Tax Incidence: A Review of Empirical Estimates and Analysis: Working Paper 2011-01," Working Papers 41511, Congressional Budget Office.
    16. Mittermaier, Ferdinand & Rincke, Johannes, 2013. "Do countries compensate firms for international wage differentials?," Journal of Public Economics, Elsevier, vol. 102(C), pages 23-36.
    17. Peichl, Andreas & Fuest, Clemens & Siegloch, Sebastian, 2013. "Wage Incidence of Local Corporate Taxation - Micro Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79916, Verein für Socialpolitik / German Economic Association.
    18. Nelly Exbrayat & Benny Geys, 2016. "Economic Integration, Corporate Tax Incidence and Fiscal Compensation," The World Economy, Wiley Blackwell, vol. 39(11), pages 1792-1811, November.
    19. Siegloch, Sebastian, 2014. "Employment Effects of Local Business Taxes," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100325, Verein für Socialpolitik / German Economic Association.
    20. Balsmeier, Benjamin, 2017. "Unions, collective relations laws and R&D investment in emerging and developing countries," Research Policy, Elsevier, vol. 46(1), pages 292-304.

    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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