Corporate taxes and union wages in the United States
R. Alison Felix
James R. Hines Jr
NBER Working Paper 15263
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.