Work

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

Year: 2018

Type: article

Abstract: A Spanish reform granted regions the authority to set income tax rates, resulting in substantial tax differentials. Using administrative data, we find that conditional on moving, taxes have a significant effect on location choice. A 1% 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. We estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0.85. The mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the net outflow of migration.

Source: The Review of Economics and Statistics

DOI: 10.1162/rest_a_00764

Authors: David R. Agrawal, Dirk Foremny

Institutions: University of Kentucky, Barcelona Institute of Economics, Universitat de Barcelona

Language: English

Topic: Local Government Finance and Decentralization

Subfield: Political Science and International Relations

Field: Social Sciences

Domain: Social Sciences

SDG: Reduced inequalities

Open Access status: bronze

Funder: Fundación Ramón Areces