Taxing Top Wealth: Migration Responses and Their Aggregate Economic Implications

119 Pages Posted: 20 Feb 2024 Last revised: 8 Nov 2024

See all articles by Katrine Jakobsen

Katrine Jakobsen

University of Copenhagen

Henrik Kleven

Princeton University - Princeton School of Public and International Affairs

Jonas Kolsrud

Uppsala University

Camille Landais

London School of Economics; Centre for Economic Policy Research (CEPR)

Mathilde Munoz

University of California, Berkeley

Date Written: February 2024

Abstract

Do wealth taxes lead to a harmful exodus of wealthy taxpayers? Using administrative data on wealth, firm ownership structure, and migration in Sweden and Denmark, we estimate international migration responses to wealth taxation and evaluate the aggregate economic implications of tax-induced migration. Exploiting three large reforms, we find significant migration responses to wealth taxes among the wealthy. We then investigate individual-level, firm-level, and market-level effects of these migration responses. A large fraction of wealthy taxpayers are business owners, and the employment, investments, and value-added of these businesses are negatively affected by owner out-migration. Nevertheless, the aggregate consequences of these effects are modest. We estimate that migration responses to a 1pp increase in the top wealth tax rate decrease the stock of wealthy taxpayers by less than 2% in the long run, and lead to a reduction of 0.05% in aggregate employment, 0.07% in aggregate investment, and 0.13% in aggregate value-added. Hence, our results demonstrate that trickle-down effects of tax-induced migration by the wealthy do exist, but that they are quantitatively small.

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Suggested Citation

Jakobsen, Katrine and Kleven, Henrik and Kolsrud, Jonas and Landais, Camille and Munoz, Mathilde, Taxing Top Wealth: Migration Responses and Their Aggregate Economic Implications (February 2024). NBER Working Paper No. w32153, Available at SSRN: https://ssrn.com/abstract=4731062

Katrine Jakobsen (Contact Author)

University of Copenhagen ( email )

Nørregade 10
Copenhagen, DK-1165
Denmark

Henrik Kleven

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Jonas Kolsrud

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

Camille Landais

London School of Economics ( email )

United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mathilde Munoz

University of California, Berkeley ( email )

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