Corporate Taxes and Union Wages in the United States

63 Pages Posted: 25 Aug 2009 Last revised: 5 Mar 2013

See all articles by R. Alison Felix

R. Alison Felix

Federal Reserve Bank of Kansas City

James R. Hines Jr.

University of Michigan; NBER

Date Written: August 2009

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.

Suggested Citation

Felix, R. Alison and Hines, James Rodger, Corporate Taxes and Union Wages in the United States (August 2009). NBER Working Paper No. w15263. Available at SSRN: https://ssrn.com/abstract=1459565

R. Alison Felix

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

James Rodger Hines (Contact Author)

University of Michigan ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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