The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from U.S. States

80 Pages Posted: 25 Dec 2017 Last revised: 29 Jun 2022

See all articles by Traviss Cassidy

Traviss Cassidy

University of Alabama

Mark Dincecco

University of Michigan at Ann Arbor

Ugo antonio Troiano

University of California Riverside

Multiple version iconThere are 3 versions of this paper

Date Written: June 29, 2022

Abstract

We evaluate how fiscal capacity and migration respond to the introduction of the individual income tax, drawing on new panel data on U.S. states from 1900 to 2010. We find that states that introduced the income tax experienced a 12 percent increase in total revenue per capita in the near term, a 15 percent increase in the medium term, and a 17 percent increase in the long term. However, the introduction of the income tax did not significantly change the absolute level of revenue over the long term, at least for post-World War II adopters. To explain this difference in the per capita and absolute results, we show that the introduction of the income tax induced significant outmigration to non-income tax states by middle- and high-earning households.

Keywords: State Capacity, Institutional Reform, Taxation, Mobility, USA

JEL Classification: H11, H41, H71, N42, D78

Suggested Citation

Cassidy, Traviss and Dincecco, Mark and Troiano, Ugo antonio, The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from U.S. States (June 29, 2022). Available at SSRN: https://ssrn.com/abstract=3093041 or http://dx.doi.org/10.2139/ssrn.3093041

Traviss Cassidy

University of Alabama ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Mark Dincecco

University of Michigan at Ann Arbor ( email )

HOME PAGE: http://sites.google.com/umich.edu/dincecco

Ugo antonio Troiano (Contact Author)

University of California Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

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