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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

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.

Suggested Citation

  • Young, Cristobal & Varner, Charles, 2011. "Millionaire Migration and State Taxation of Top Incomes: Evidence From a Natural Experiment," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 255-283, June.
  • Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:255-83
    DOI: 10.17310/ntj.2011.2.02
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    Replication

    This item has been replicated by:
  • Roger S. Cohen & Andrew E. Lai & Charles Steindel, 2015. "A Replication of “Millionaire Migration and State Taxation of Top Incomes," Public Finance Review, , vol. 43(2), pages 206-225, March.
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