We examine whether personal income taxes affect organization performance. We use the 2021 introduction of Name, Image, and Likeness (NIL) compensation rules in U.S. college sports, which removed the ban for athletes to earn income for their sports performance while maintaining their eligibility, as a natural experiment. Exploiting novel performance data, we find that teams in low-tax rate states have approximately three more wins per season than schools in high-tax states post-NIL. The effects of personal income taxes on wins are more pronounced among elite conference schools and schools that can attract top recruits. We also find that if elite conference schools are located in low-tax-rate states, they are more likely to advance to the final stages of the championship tournament. Finally, we provide evidence for the mechanism behind improved organizational outcomes: We show that top-ranked recruits are significantly more likely to choose schools in low-tax-rate states after the implementation of NIL. Collectively, our findings show that individual taxation is linked to talent mobility and thus to organizational success.
| Speaker: | Dr Nathan C Goldman Associate Professor, North Carolina State University |
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