Tax Policies and the Labor Market

In the first chapter, I study the Work Opportunity Tax Credit (WOTC) which is a federal tax credit available to businesses who hire employees from certain targeted groups that have consistently faced significant barriers to employment. The PATH Act added long-term unemployment recipients as a target group for the WOTC in 2015. Using CPS data and both a difference-in-differences and triple difference model, I assess the effect of the inclusion of this group in the WOTC on employment and wages for newly eligible individuals. The WOTC increased the monthly probability a long-term unemployment recipient started a job by 2.3 percentage points in the post period from a base monthly reemployment rate of 15.8%. I find no evidence of the tax credit being passed through to workers in the form of higher wages or benefits, and I find no evidence of increased employee churn due to the employer subsidy's minimum hours requirement. Finally, I find that the employment increase is largely driven by workers with thirty or more weeks of unemployment instead of those just above the six month eligibility cutoff. The second chapter examines Tax Increment Financing (TIF) districts, the largest economic development program in the City of Chicago, allocating nearly $1 billion in tax revenues annually. Using comprehensive data on employment by place of work and place of residency, this chapter studies if TIF districts see an increase in jobs as a result of designation, and whether the residents in neighborhoods designated as TIF districts see employment benefits from the designation. To account for the endogenous selection of TIF areas, I implement a propensity score matching dynamic difference-in-differences approach exploiting differential timing of TIF designation. I find that TIF designation increases the number of jobs in a selected census block by 15% over 5 years. However, the employment levels of residents living in or around TIF districts shows no increase due to designation. I also find evidence of substantial spillover effects to adjacent blocks, and limited neighborhood compositional changes. These findings suggest that TIF districts can be effective in revitalizing commercial and industrial areas while the ability of TIF to improve outcomes in blighted residential neighborhoods surrounding the district is limited. In the final chapter, I use comprehensive Census Bureau data on interstate migration to explore how tax rate changes impact the destination choice of interstate movers using a simulated tax rate instrumental variables approach to control for endogenous wage changes within an industry. I find that a 1% change in disposable income changes the relative proportions of interstate movers by about 0.1%, a very modest elasticity. I do find evidence of higher elasticities for higher income workers.