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State Income Taxes and Interstate Migration

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  • Roger Cohen
  • Andrew Lai
  • Charles Steindel

Abstract

This paper examines the comprehensive IRS data set of state-state migration flows for evidence that differences in state income tax rates are associated with migration patterns. Using annual data on moves between every pair of states, pooled time-series cross-section regressions indicate that in the 1992–2010 period states with higher top marginal income tax rates experienced relatively greater outmigration of taxpayers and gross income. To illustrate the magnitude of the tax effect, we estimate that by 2010 cumulative losses since the enactment of New Jersey’s 2004 “millionaires’ tax” were as much as 42,000 taxpayers and $6.9 billion in annual adjusted gross income. These results suggest that sustained, relatively high income tax rates could gradually erode a state’s population and revenue base.

Suggested Citation

  • Roger Cohen & Andrew Lai & Charles Steindel, 2014. "State Income Taxes and Interstate Migration," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 49(3), pages 176-190, July.
    • Handle: RePEc:pal:buseco:v:49:y:2014:i:3:p:176-190
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    Cited by:

    1. Saltz, Ira S. & Capener, Don, 2016. "60 Years Later and Still Going Strong: The Continued Relevance of the Tiebout Hypothesis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(1).
    2. Jean-Pierre Aubry & Caroline V. Crawford, 2016. "Does Public Pension Funding Affect Where People Move?," State and Local Pension Plans Briefs ibslp52, Center for Retirement Research.
    3. Jean-Pierre Aubry & Caroline V. Crawford, 2016. "Does Public Pension Funding Affect Where People Move?," Issues in Brief ibslp52, Center for Retirement Research.

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