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Dirk Foremny
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Publisher: Journals Gateway
The Review of Economics and Statistics (2019) 101 (2): 214–232.
Published: 01 May 2019
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A Spanish reform granted regions the authority to set income tax rates, resulting in substantial tax differentials. Using administrative data, we find that conditional on moving, taxes have a significant effect on location choice. A 1% increase in the net-of-tax rate for a region relative to others increases the probability of moving to that region by 1.7 percentage points. We estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0.85. The mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the net outflow of migration.
Includes: Supplementary data