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

A recent Spanish tax reform granted regions the authority to set income tax rates, resulting in substantial tax differentials. We use individual-level information from Social Security records over a period of one decade.... [ view full abstract ]

A recent Spanish tax reform granted regions the authority to set income
tax rates, resulting in substantial tax differentials. We use
individual-level information from Social Security records over a period
of one decade. Conditional on moving, taxes have a significant effect on
the 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 1.4 percentage points. Focusing on the stock of top-taxpayers,
we estimate a mobility elasticity of 0.25. Our model implies that the
increase in tax revenue due to higher tax rates is larger than the loss
in tax revenue from the out-flow of migration.