Personal Taxes and Firm Skill Hiring: Evidence from 27 Million Job Postings
55 Pages Posted: 2 Jul 2019 Last revised: 23 Mar 2021
Date Written: December 27, 2019
Using big data on U.S. job postings, we document detrimental effects of local personal income taxes on the level of education, experience, and technological skills required by firms when hiring workers (downskilling). Tax-induced downskilling is identified at the county level and at individual firms' establishments. It is driven by taxes on middle-class earners. Multi-state corporations internally reassign their hiring of low- vs. high-skill workers according to local personal tax changes. Together with worker downskilling, firms cut IT investment in localities that hike personal taxes. Our results suggest that corporations amplify the ``brain drain'' effect induced by local personal income taxes.
Keywords: State personal income taxes, Skilled labor, Human capital, Firm organizational form
JEL Classification: E24, J23, G31, H24
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