Do Corporate Taxes Affect Workplace Safety?

Abstract

We examine how workplace injury rates change when firms are subject to a corporate tax shock. We find that tax increases lead to a significance increase in reported injuries, but tax decreases have no similar effect. Our difference-in-differences empirical strategy relies on staggered state-level corporate tax changes that exploits spatial discontinuity in treatment and control establishments located in contiguous border counties within the same firm. The results are strongest in industries with low union bargaining power, for firms with high marginal tax rates, poor safety culture scores, firms that barely meet or beat analysts’ earnings forecasts and firms that hire seasonal workers. Our results suggest that tax increases lead to real effects at the expense of employees, with no similar benefit accruing for tax cuts.

Keywords: workplace safety, employee welfare, corporate taxes, natural experiments

JEL Classification: G30; H25; H32; J28; K32