The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists†

The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star... AbstractWe 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. (JEL H24, H25, H71, H73, J44, J61, R32) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
0002-8282
D.O.I.
10.1257/aer.20150508
Publisher site
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Abstract

AbstractWe 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. (JEL H24, H25, H71, H73, J44, J61, R32)

Journal

American Economic ReviewAmerican Economic Association

Published: Jul 1, 2017

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