The taxing deed of globalization

Abstract

This paper examines the effects of globalization on the distribution of worker-specific labor taxes using a unique set of tax calculators. We find a differential effect of higher trade and factor mobility on relative tax burdens in 1980-1993 versus 1994-2007 in the OECD. Prior to 1994, greater openness meant that higher income earners were taxed progressively more. However, after 1994, we document a globalization-induced rise in the labor income tax burden of the middle class, while the top 1 percent of workers and employees faced a reduction in their tax burden of 0.59-1.45 percentage points.