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
Date Written: March 1, 2017
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
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