American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
State Taxation of Nonresident Income and the Location of Work
American Economic Journal: Economic Policy
vol. 16,
no. 1, February 2024
(pp. 447–81)
Abstract
Prior studies show that taxes matter for the residential locations of high-income earners. But states raise a significant share of revenue from nonresidents. Using variation in state tax rates, we provide causal evidence on the effect of the net-of-tax rate on the location of labor supply for professional golfers. State taxes induce high-income earners to shift employment to low-tax states without a residence change. The elasticity of working in a state is 0.34 and, consistent with the superstar phenomenon, increases with earnings. Our results suggest a novel margin of mobility responses for top earners: the spatial relocation of labor supply by nonresidents.Citation
Agrawal, David R., and Kenneth Tester. 2024. "State Taxation of Nonresident Income and the Location of Work." American Economic Journal: Economic Policy, 16 (1): 447–81. DOI: 10.1257/pol.20210567Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- J22 Time Allocation and Labor Supply
- J44 Professional Labor Markets; Occupational Licensing
- J61 Geographic Labor Mobility; Immigrant Workers
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- Z22 Sports Economics: Labor Issues
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