The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists
Enrico Moretti, Daniel J. Wilson
American Economic Review · 2017 · Volume 107 · Issue 7
Abstract
We quantify how sensitive is migration by star scientists to changes in personal and business tax differentials across states. We uncover large, stable, and precisely estimated effects of personal and corporate taxes on star scientists' migration patterns. The long-run elasticity of mobility relative to taxes is 1.8 for personal income taxes, 1.9 for state corporate income tax, and —1.7 for the investment tax credit. While there are many other factors that drive when innovative individuals and innovative companies decide to locate, there are enough firms and workers on the margin that state taxes matter.
Keywords
Personal Income and Other Nonbusiness Taxes and Subsidies, includes inheritance and gift taxes, Business Taxes and Subsidies including sales and value-added (VAT), State and Local Taxation, Subsidies, and Revenue, State and Local Government, Intergovernmental Relations: Interjurisdictional Differentials and Their Effects, Professional Labor Markets, Occupational Licensing, Geographic Labor Mobility, Immigrant Workers, Other Spatial Production and Pricing Analysis
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