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State Taxation of Nonresident Income and the Location of Work

Author

Listed:
  • Agrawal, David R.
  • Tester, Kenneth

Abstract

Prior studies show that taxes matter for the residential locations of high-income earners. But, states raise a significant share of revenue from nonresidents. Using variation in state tax rates, we provide causal evidence on the effect of the net-of-tax rate on the location of labor supply for professional golfers. State taxes induce high-income earners to shift employment to low-tax states without a residence change. The elasticity of working in a state is 0.34, and consistent with superstar phenomenon, increases with earnings. Our results suggest a novel margin of mobility responses for top-earners: the spatial relocation of labor supply by nonresidents.

Suggested Citation

  • Agrawal, David R. & Tester, Kenneth, 2023. "State Taxation of Nonresident Income and the Location of Work," GLO Discussion Paper Series 1258, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1258
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    Cited by:

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    2. Lisa Marie Timm & Massimo Giuliodori & Paul Muller, 2025. "Tax Incentives for Migrants with Mid-level Earnings: Evidence from the Netherlands," American Economic Journal: Applied Economics, American Economic Association, vol. 17(3), pages 42-79, July.
    3. Lawrence M. Kessler & Donald Bruce, 2024. "A SALT on real estate? Housing market and migration responses to the limit on the state and local tax deduction," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 683-704, October.
    4. Agrawal, David R. & Brueckner, Jan K., 2025. "Taxes and telework: The impacts of state income taxes in a work-from-home economy," Journal of Urban Economics, Elsevier, vol. 145(C).
    5. Changlin Yu & Yanming Li, 2025. "Digitalization of tax collection and enterprises’ social security compliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(4), pages 1213-1252, August.
    6. Spencer Bastani, 2025. "The marginal value of public funds: a brief guide and application to tax policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(4), pages 919-956, August.
    7. Jan K. Brueckner & David R. Agrawal, 2025. "Work-from-Home and Wage Convergence Across Cities: An Exploration," CESifo Working Paper Series 12150, CESifo.
    8. Dolls, Mathias & Fuest, Clemens & Krolage, Carla & Neumeier, Florian, 2025. "Who bears the burden of real estate transfer taxes? Evidence from the German housing market," Journal of Urban Economics, Elsevier, vol. 145(C).

    More about this item

    Keywords

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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