IDEAS home Printed from https://ideas.repec.org/p/ags/umapmt/330265.html
   My bibliography  Save this paper

Tax Deductions & Interstate Migration

Author

Listed:
  • Simonson, Matthew J.

Abstract

In December of 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 (TCJA). While the law made several changes to the tax code, one major change was instituting a cap on the amount of state and local tax (SALT) deductions a filer can claim. The SALT cap limits a tax filer’s ability to limit the impacts of state and local taxes on their overall tax burden. This new inability to soften the impact of state and local taxes could cause residents to view states with higher taxes as less attractive. The results presented in this paper showed a state’s top income tax rate and a state’s representative tax burden had a statistically significant negative effect on the probability of a household living in a new state after the SALT cap was implemented. This effect was statistically different than the negative impact of the tax measure before the passing. Suggesting, for households of varying income levels, if a state were to increase the top income tax rate by 10 percentage points the probability of a household moving to that state would decrease, on the low end 0.17 percentage points and on the high end 0.52 percentage points more than if the SALT cap was not in place. Larger impacts were found for the representative tax burden measure, where for a 10% increase in the state tax burden the probability of a household moving to the state would fall by 0.57 percentage points on the low end and 0.87 percentage points on the high end.

Suggested Citation

  • Simonson, Matthew J., 2022. "Tax Deductions & Interstate Migration," Master's Theses and Plan B Papers 330265, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umapmt:330265
    DOI: 10.22004/ag.econ.330265
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/330265/files/Simonson_Thesis_Final_21DEC2022.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.330265?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Enchautegui, Maria E, 1997. "Welfare Payments and Other Economic Determinants of Female Migration," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 529-554, July.
    3. Richard J. Cebula, 2009. "Migration and the Tiebout‐Tullock Hypothesis Revisited," American Journal of Economics and Sociology, Wiley Blackwell, vol. 68(2), pages 541-551, April.
    4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    5. Cebula, Richard J, 1990. "A Brief Empirical Note on the Tiebout Hypothesis and State Income Tax Policies," Public Choice, Springer, vol. 67(1), pages 87-89, October.
    6. Enrico Moretti & Daniel J. Wilson, 2017. "The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists," American Economic Review, American Economic Association, vol. 107(7), pages 1858-1903, July.
    7. Young, Cristobal & Varner, Charles, 2011. "Millionaire Migration and State Taxation of Top Incomes: Evidence From a Natural Experiment," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 255-283, June.
    8. Afonso, Whitney B., 2018. "The effect of a state income tax on migration: the example of Connecticut," Journal of Public Policy, Cambridge University Press, vol. 38(1), pages 113-140, March.
    9. Mark Gius, 2011. "The effect of income taxes on interstate migration: an analysis by age and race," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 46(1), pages 205-218, February.
    10. Tullock, Gordon, 1971. "Public Decisions as Public Goods," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 913-918, July-Aug..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Saltz, Ira S. & Capener, Don, 2016. "60 Years Later and Still Going Strong: The Continued Relevance of the Tiebout Hypothesis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(1).
    2. Martinez, Isabel Z., 2016. "Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland," VfS Annual Conference 2016 (Augsburg): Demographic Change 145643, Verein für Socialpolitik / German Economic Association.
    3. Martínez, Isabel Z., 2022. "Mobility responses to the establishment of a residential tax haven: Evidence from Switzerland," Journal of Urban Economics, Elsevier, vol. 129(C).
    4. Richard J. Cebula, 2009. "Migration and the Tiebout‐Tullock Hypothesis Revisited," American Journal of Economics and Sociology, Wiley Blackwell, vol. 68(2), pages 541-551, April.
    5. Dan Rickman & Hongbo Wang, 2020. "U.S. State And Local Fiscal Policy And Economic Activity: Do We Know More Now?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 424-465, April.
    6. Asmae AQZZOUZ & Nathalie PICARD, 2024. "Residential Mobility And Life Cycle: Examination Of The Influence Of Local Taxes," Working Papers of BETA 2024-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Fanyu Chen & Zi Wen Vivien Wong & Siong Hook Law, 2024. "Brain drain: what is the role of institutions?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 51(3), pages 605-628, September.
    8. Mathilde Munoz, 2019. "Do European Top Earners React to Labour Taxation Through Migration ?," PSE Working Papers hal-02876987, HAL.
    9. Yizhou Zhang & Geoffrey J. D. Hewings, 2019. "Nonlinear tax-induced migration: an overlooked tale," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 425-438, June.
    10. Richard J. Cebula, 2024. "The Tiebout-Tullock hypothesis re-examined using tax freedom measures: the case of post-Great Recession state-level gross in-migration," Public Choice, Springer, vol. 199(1), pages 65-81, April.
    11. Aziz N. Berdiev & James W. Saunoris, 2020. "Cross‐Country Evidence Of Corruption Spillovers To Formal And Informal Entrepreneurship," Contemporary Economic Policy, Western Economic Association International, vol. 38(1), pages 48-66, January.
    12. Mathilde Munoz, 2019. "Do European Top Earners React to Labour Taxation Through Migration ?," Working Papers hal-02876987, HAL.
    13. Joshua Hall & Donald Lacombe & Maria Tackett, 2020. "Income Tax Adoption and Spatial Diffusion," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(2), pages 185-193, June.
    14. Richard Cebula, 2002. "Net interstate population growth rates and the Tiebout-Tullock hypothesis: New empirical evidence, 1990–2000," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(4), pages 414-421, December.
    15. Asmae AQZZOUZ & Nathalie PICARD, 2023. "Residential Mobility And Life Cycle: Identifying The Role Of Local Taxes," Working Papers of BETA 2023-43, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    16. Giertz, Seth H. & Ramezani, Rasoul, 2018. "Taxes, Wage Capitalization and the Ability of States to Redistribute Income," GLO Discussion Paper Series 291, Global Labor Organization (GLO).
    17. Nikias Sarafoglou & William A. Sprigg, 2015. "A Selective Migration Review: from public policy to public health," Department of Economics University of Siena 712, Department of Economics, University of Siena.
    18. Enrico Rubolino & Tommaso Giommoni, 2023. "Taxation and Mobility: Evidence from Tax Decentralization in Italy," CESifo Working Paper Series 10655, CESifo.
    19. Steiner, Susan, 2005. "Decentralisation and Poverty Reduction: A Conceptual Framework for the Economic Impact," GIGA Working Papers 3, GIGA German Institute of Global and Area Studies.
    20. Marie Poprawe, 2015. "On the relationship between corruption and migration: empirical evidence from a gravity model of migration," Public Choice, Springer, vol. 163(3), pages 337-354, June.

    More about this item

    Keywords

    Consumer/Household Economics; Public Economics;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:umapmt:330265. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/daumnus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.