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Millionaire Migration And State Taxation Of Top Incomes: Evidence From A Natural Experiment

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  • Young, Cristobal
  • Varner, Charles
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    Abstract

    This paper examines the migration response to a millionaire tax in New Jersey, which raised its income tax rate on top earners by 2.6 percentage points to 8.97 percent, one of the highest tax rates in the country. Drawing on unique state tax micro-data, we estimate the migration response of millionaires to the rate increase, using a difference-in-differences estimation strategy. The results indicate little responsiveness, with semi-elasticities generally below 0.1. Tax-induced migration is estimated to be higher among people of retirement age, people living on investment income rather than wages, and people who work (and pay tax) entirely in-state. The tax is estimated to raise $1 billion per year and modestly reduce income inequality.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 64 (2011)
    Issue (Month): 2 (June)
    Pages: 255-83

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    Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:255-83

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    Cited by:
    1. Flores Unzaga, Ismael Martin & Zhu, Junyi, 2014. "Bracket Creep Revisited: Progressivity and a Solution by Adjusting the Rich Tax in Germany," MPRA Paper 57664, University Library of Munich, Germany.
    2. Etienne Lehmann & Laurent Simula & Alain Trannoy, 2013. "Tax Me If You Can!Optimal Nonlinear Income Tax Between Competing Governments," TEPP Working Paper, TEPP 2013-06, TEPP.
    3. Bach, Stefan & Corneo, Giacomo & Steiner, Viktor, 2011. "Optimal top marginal tax rates under income splitting for couples," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8435, C.E.P.R. Discussion Papers.
    4. Tino Sanandaji, 2014. "The international mobility of billionaires," Small Business Economics, Springer, Springer, vol. 42(2), pages 329-338, February.
    5. Jeffrey Thompson, 2011. "The Impact of Taxes on Migration in New England," Published Studies, Political Economy Research Institute, University of Massachusetts at Amherst migration_peri_april13, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. Blaufus, Kay & Hechtner, Frank & Möhlmann, Axel, 2014. "The effect of tax preparation expenses for employees: Evidence from Germany," arqus Discussion Papers in Quantitative Tax Research, arqus - Arbeitskreis Quantitative Steuerlehre 157, arqus - Arbeitskreis Quantitative Steuerlehre.
    7. Giertz, Seth H. & Tosun, Mehmet S., 2012. "Migration Elasticities, Fiscal Federalism and the Ability of States to Redistribute Income," IZA Discussion Papers 6798, Institute for the Study of Labor (IZA).
    8. Edward L. Glaeser, 2012. "Urban Public Finance," NBER Working Papers 18244, National Bureau of Economic Research, Inc.
    9. Flores Unzaga, Ismael Martin & Zhu, Junyi, 2014. "Bracket Creep Revisited: Progressivity and a Solution by Adjusting the Rich Tax in Germany," EconStor Preprints, ZBW - German National Library of Economics 100006, ZBW - German National Library of Economics.
    10. Conway, Karen Smith & Rork, Jonathan C., 2012. "No Country For Old Men (Or Women) — Do State Tax Policies Drive Away The Elderly?," National Tax Journal, National Tax Association, National Tax Association, vol. 65(2), pages 313-56, June.
    11. Marius Brülhart & Sam Bucovetsky & Kurt Schmidheiny, 2014. "Taxes in Cities," CESifo Working Paper Series, CESifo Group Munich 4951, CESifo Group Munich.
    12. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, Elsevier, vol. 96(11), pages 1079-1091.
    13. David Agrawal & William H. Hoyt, 2014. "State Tax Differentials, Cross-Border Commuting, and Commuting Times in Multi-State Metropolitan Areas," CESifo Working Paper Series, CESifo Group Munich 4852, CESifo Group Munich.
    14. Jeffrey Thompson, 2012. "Raising Revenue from High-Income Households: Should States Continue to Place the Lowest Tax Rates on Those with the Highest Incomes?," Published Studies, Political Economy Research Institute, University of Massachusetts at Amherst revenue_peri_march5, Political Economy Research Institute, University of Massachusetts at Amherst.

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