The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists
Abstract
In the U.S., personal and business taxes vary enormously from state to state. While these differences have the potential to affect the geographical location of highly skilled workers and employers across the country, evidence on their effects is limited. 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 and 1.9 for state corporate income tax. While there are other factors that drive when innovative individual and innovative companies decide to locate, there are enough firms and workers on the margin that state taxes matter.
Enrico Moretti is the Michael Peevy and Donald Vial Professor of Economics at the University of California, Berkeley. He serves as the Editor in Chief of the Journal of Economic Perspectives and is a Visiting Scholar at the Federal Reserve Bank of San Francisco. He is also Research Associate at the National Bureau of Economic Research (Cambridge), Research Fellow at the Centre for Economic Policy Research (London) and the Institute for the Study of Labor (Bonn).
Co-sponsored with Department of Economics
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