We examine the extent to which the labor market facilitates the diffusion of tax planning knowledge across firms. Using a novel dataset of tax department employee movements between S&P 1500 firms, we find that firms experience an increase in their tax planning after hiring a tax employee from a tax aggressive firm. This finding is robust to various research designs and specifications. Consistent with tax planning knowledge driving this result, we find that the tax planning benefit of hiring an employee from a tax aggressive firm is stronger when the employee has more tax experience and is hired into a senior tax department role, and when the hiring firm likely had less tax planning knowledge prior to the hire. Further tests suggest that tax planning knowledge is highly specific in nature: the increase in tax avoidance is larger when the hiring and former firms are similar (i.e., operating in the same sector or having similar foreign operations), and firms are more likely to hire tax department employees from firms with similar characteristics. Our study documents the first-order role of the labor market in the diffusion of tax planning knowledge across firms, and suggests that tax department human capital is a central determinant of tax planning outcomes.

More on this topic

BFI Working Paper·Mar 19, 2025

The Impact of Employment on Partnerships: Evidence from a Refugee Settlement

Yueh-ya Hsu, Reshmaan Hussam, Erin M. Kelley, and Gregory Lane
Topics: Employment & Wages
BFI Working Paper·Mar 10, 2025

The Rise of Healthcare Jobs

Joshua Gottlieb, Neale Mahoney, Kevin Rinz, and Victoria Udalova
Topics: Employment & Wages, Health care
BFI Working Paper·Mar 10, 2025

The Curious Surge of Productivity in U.S. Restaurants

Austan Goolsbee, Chad Syverson, Rebecca Goldgof, and Joe Tatarka
Topics: COVID-19, Employment & Wages, Industrial Organization