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

• Agrawal, David R. ^[1] ; Foremny, Dirk ^[2]
  1. [1] University of Kentucky

     University of Kentucky

     Estados Unidos

     
  2. [2] Universitat de Barcelona

     Universitat de Barcelona

     Barcelona, España

     
• Localización: Documentos de trabajo ( XREAP ), Nº. 9, 2018
• Idioma: inglés
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• Resumen

  • Recent Spanish tax reform granted regions the authority to set income tax rates, resulting in substantial tax di erentials. We use individual-level information from Social Security records over a period of one decade. Conditional on moving, taxes have a significant effect on 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. 7 percentage points. Focusing on the stock of top-taxpayers, we estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0. 85. Using this elasticity, a theoretical model implies that the mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the out-flow of migration.