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Income Taxes and the Mobility of the Rich: Evidence from US and UK Households in Switzerland

Author

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  • Marko Köthenbürger
  • Costanza Naguib
  • Christian Stettler
  • Michael Stimmelmayr

Abstract

We provide quasi-experimental evidence on the income tax-induced migration of foreign high-income households living in Switzerland by exploiting the differential tax treatment of UK and US households. While the two groups are similar in terms of non-tax sorting preferences, US households are effectively insulated from Swiss income taxation due to the US world-wide income tax system. Comparing the location choices of UK households (our treatment group) with those of US households (our control group) within a one-hour commuting zone of Zurich, we find a migration elasticity with respect to the net-of-tax rate of around eight. This estimate mirrors the possibility of unrestricted migration between small Swiss municipalities with significantly different income tax rates.

Suggested Citation

  • Marko Köthenbürger & Costanza Naguib & Christian Stettler & Michael Stimmelmayr, 2023. "Income Taxes and the Mobility of the Rich: Evidence from US and UK Households in Switzerland," CESifo Working Paper Series 10376, CESifo.
    • Handle: RePEc:ces:ceswps:_10376
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    Cited by:

    1. Marius Brülhart & Marko Koethenbuerger & Matthias Krapf & Raphaël Parchet & Kurt Schmidheiny & David Staubli, 2023. "Competition, Harmonization and Redistribution: Corporate Taxes in Switzerland," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    high-income households; location choice; income taxes; sorting;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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