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State and Local Tax Policy in a Time of Telework

Author

Listed:
  • David R. Agrawal
  • Xinyu Chen

Abstract

The taxing authority of subnational governments is limited by the geographic location of individuals and economic activity. The rise of telework decouples a worker's residence from the employer's location, creating challenges for personal income taxes, corporate income taxes, and unemployment insurance. Using Census data, we show that teleworkers are more likely than non-teleworkers to move interstate and realize larger reductions in their state tax burdens from a move. Motivated by this evidence, we evaluate alternative principles for sourcing labor income to the state of residence, the employer, or work and discuss how remote work reshapes subnational tax bases.

Suggested Citation

  • David R. Agrawal & Xinyu Chen, 2026. "State and Local Tax Policy in a Time of Telework," CESifo Working Paper Series 12422, CESifo.
    • Handle: RePEc:ces:ceswps:_12422
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp12422.pdf
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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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