Effects of international tax provisions on domestic labor markets

Coins arranged to look like a world map.
Shutterstock / pogonici

Executive Summary

  • We study the effects of two key U.S. international tax provisions on domestic labor markets.
  • We find the introduction of Check-the-Box entity election rules in 1997, which decreased the effective tax rate on foreign income for U.S. multinationals, led to substantial domestic job and earnings losses. We calculate that by 2003, Check-the-Box led to the loss of more than one million U.S. jobs and more than $40 billion per year in domestic earnings.
  • The 2004 U.S. repatriation tax holiday, which decreased effective repatriation tax rates by 85%, led to no domestic employment or earnings growth.
  • R&D intensive multinationals were less likely to offshore jobs in response to Check-the-Box and were more likely to bring foreign earnings home under the repatriation holiday. Although even these firms did not use repatriations to create jobs.
  • Our findings question the conventional wisdom that decreasing the foreign tax burden of multinationals will lead to more job creation and higher wages at home. Tax policies that do not incentivize multinationals to shift jobs abroad, such as a country-by-county Global Minimum Tax, are likely better options for policymakers hoping to protect domestic jobs.

Read the full working paper

Read the policy brief


  • Acknowledgements and disclosures

    Garret was supported by the Jacobs Levy Center for Equity Research. Suarez Serrato was supported by a grant from Arnold Ventures. and Garret and Suarez Serrato both received support from the International Tax Policy Forum. The authors did not receive financial support from any firm or person for this article or, other than the aforementioned, from any firm or person with a financial or political interest in this article. The authors are not currently an officer, director, or board member of any organization with a financial or political interest in this article.

    The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation.