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

77 Pages Posted: 16 Jun 2016 Last revised: 11 May 2017

David R. Agrawal

University of Kentucky - James W. Martin School of Public Policy and Administration; University of Kentucky - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Dirk Foremny

University of Barcelona - Institut d'Economia de Barcelona (IEB)

Date Written: March 1, 2017

Abstract

A recent Spanish tax reform granted regions the authority to set income tax rates, resulting in substantial tax differentials. We use individual-level information from Social Security records over a period of one decade. Conditional on moving, taxes have a significant effect on the location choice. A one percent increase in the net of tax rate for a region relative to others increases the probability of moving to that region by 1.4 percentage points. Focusing on the stock of top-taxpayers, we estimate a mobility elasticity of 0.25. Our model implies that the increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the out-flow of migration.

Keywords: Migration, Taxes, Mobility, Rich, Decentralization

JEL Classification: H24, H31, H73, J61, R23

Suggested Citation

Agrawal, David R. and Foremny, Dirk, Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=2796472

David Robert Agrawal (Contact Author)

University of Kentucky - James W. Martin School of Public Policy and Administration ( email )

433 Patterson Office Tower
Lexington, KY 40506-0027
United States
859-257-8608 (Phone)

HOME PAGE: http://www.uky.edu/~drag222/

University of Kentucky - Department of Economics ( email )

Lexington, KY 40506
United States

HOME PAGE: http://www.uky.edu/~drag222/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.uky.edu/~drag222/

Dirk Foremny

University of Barcelona - Institut d'Economia de Barcelona (IEB) ( email )

c/ Tinent Coronel Valenzuela, 1-11
Barcelona, 08034
Spain

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