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The Income Tax Responsiveness of the Rich: Evidence from Free Agent Major League Baseball All-Stars

10 Pages Posted: 4 Nov 2007  

Justin M. Ross

Indiana University - School of Public & Environmental Affairs

Robert R. Dunn

West Virginia University - College of Business & Economics

Abstract

This paper examines the responsiveness of the rich to state income taxes. We use Major League Baseball free agents who were named All-Stars at some point in their career and who signed with a U.S. team for the 1991 through 2002 seasons. This data set overcomes some of the previous difficulties encountered in similar studies but also has limitations representing the general rich population. We find evidence that the wages of this subset of players do adjust to offset the burden of state income taxes, specifically a 1% decrease in net-of-tax rate leads to a 3.3% increase in salary.

Suggested Citation

Ross, Justin M. and Dunn, Robert R., The Income Tax Responsiveness of the Rich: Evidence from Free Agent Major League Baseball All-Stars. Contemporary Economic Policy, Vol. 25, No. 4, pp. 639-648, October 2007. Available at SSRN: https://ssrn.com/abstract=1026120 or http://dx.doi.org/10.1111/j.1465-7287.2007.00078.x

Justin M. Ross (Contact Author)

Indiana University - School of Public & Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Robert R. Dunn

West Virginia University - College of Business & Economics ( email )

Morgantown, WV 26506-6025
United States

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