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State Income Taxes and Interstate Migration

State Income Taxes and Interstate Migration Abstract This paper examines the comprehensive IRS data set of state-state migration flows for evidence that differences in state income tax rates are associated with migration patterns. Using annual data on moves between every pair of states, pooled time-series cross-section regressions indicate that in the 1992–2010 period states with higher top marginal income tax rates experienced relatively greater outmigration of taxpayers and gross income. To illustrate the magnitude of the tax effect, we estimate that by 2010 cumulative losses since the enactment of New Jersey’s 2004 “millionaires’ tax” were as much as 42,000 taxpayers and $6.9 billion in annual adjusted gross income. These results suggest that sustained, relatively high income tax rates could gradually erode a state’s population and revenue base. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

State Income Taxes and Interstate Migration

Cohen, Roger; Lai, Andrew; Steindel, Charles
Business Economics , Volume 49 (3): 15 – Jul 1, 2014
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References (50)

Publisher
Springer Journals
Copyright
2014 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.1057/be.2014.25
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper examines the comprehensive IRS data set of state-state migration flows for evidence that differences in state income tax rates are associated with migration patterns. Using annual data on moves between every pair of states, pooled time-series cross-section regressions indicate that in the 1992–2010 period states with higher top marginal income tax rates experienced relatively greater outmigration of taxpayers and gross income. To illustrate the magnitude of the tax effect, we estimate that by 2010 cumulative losses since the enactment of New Jersey’s 2004 “millionaires’ tax” were as much as 42,000 taxpayers and $6.9 billion in annual adjusted gross income. These results suggest that sustained, relatively high income tax rates could gradually erode a state’s population and revenue base.

Journal

Business Economics – Springer Journals

Published: Jul 1, 2014

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