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

David R. Agrawal¹; Dirk Foremny²

¹ University of Kentucky and CESifo · ² Institut d'Economia de Barcelona, Universitat de Barcelona, and CESifo

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.

DOI

10.1162/rest_a_00764

Volume

101 (2)

Pages

214-232

Language

en

Export

BibTeX

Sources

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