Heterogeneity in Income Tax Incidence Are the Wages of Dangerous Jobs More Responsive to Tax Changes than the Wages of Safe Jobs?

David Powell

No WR-706-1, Working Papers from RAND Corporation

Abstract: Income taxes distort the relationship between wages and non-taxable amenities. When the marginal tax rate increases, amenities become more valuable as the compensating differential for low-amenity jobs is taxed away. While there is evidence that the provision of amenities responds to taxes, the literature has ignored the consequences for job characteristics which cannot fully-adjust. This paper compares the wage response of dangerous jobs to the wage response of safe jobs. When tax rates increase, we should see the pre-tax compensating differential for on-the-job risk increase. Empirically, this paper finds large differences in the wage response of jobs based on their riskiness.

Keywords: income taxes; value of a statistical life; tax incidence; compensating differentials (search for similar items in EconPapers)
JEL-codes: H22 H24 J17 J28 J31 (search for similar items in EconPapers)
Pages: 45
Date: 2011-01
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