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Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms

Author

Listed:
  • David R. Agrawal

    (University of Kentucky, Department of Economics and Martin School of Public Policy & Administration)

  • Dirk Foremny

    (IEB, Department of Public Economy, Political Economy and Spanish Economy, Universitat de Barcelona, Facultat d'Economia i Empresa)

Abstract

recent Spanish tax reform granted regions the authority to set income tax rates, resulting in substantial tax di erentials. We use individual-level information from Social Security records over a period of one decade. Conditional on moving, taxes have a significant e ect on location choice. A one percent increase in the net of tax rate for a region relative to others increases the probability of moving to that region by 1.7 percentage points. Focusing on the stock of top-taxpayers, we estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0.85. Using this elasticity, a theoretical model implies that the mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the out- ow of migration.

Suggested Citation

  • David R. Agrawal & Dirk Foremny, 2018. "Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms," Working Papers XREAP2018-9, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2018.
    • Handle: RePEc:xrp:wpaper:xreap2018-9
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    Keywords

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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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