Project Title
Do State Income Tax Rates Affect Net State-to-State Migration?
Faculty Mentor(s) Name(s)
Brooke Conaway
Abstract
The 2020 census resulted in some states gaining or losing congressional seats due to changes in population. Having more congressional seats not only gives more legislative power to a state, but it also gives more electoral college votes in the presidential election. Tiebout suggested geographic areas compete with one another based in part on the costs (e.g., taxes) and benefits (e.g., public goods provided) of living in that area. In other words, other relevant factors held constant, a rise in tax rates may drive some people to move to areas with lower tax rates. To test this theory, I use state migration statistics and the top marginal income tax rates for US states for the years 2010 through 2019.Using state and year fixed effects and other relevant controls, I ran an ordinary least squares regression to test whether the top marginal tax rate affects state-to-state migration. My results show that for every one percentage point increase in the top marginal tax rate, a state should expect to lose approximately 5,687residents. In addition to the political implications, these results also suggest a state could encourage an influx of residents and increase tax revenues by decreasing income tax rates.
Do State Income Tax Rates Affect Net State-to-State Migration?
The 2020 census resulted in some states gaining or losing congressional seats due to changes in population. Having more congressional seats not only gives more legislative power to a state, but it also gives more electoral college votes in the presidential election. Tiebout suggested geographic areas compete with one another based in part on the costs (e.g., taxes) and benefits (e.g., public goods provided) of living in that area. In other words, other relevant factors held constant, a rise in tax rates may drive some people to move to areas with lower tax rates. To test this theory, I use state migration statistics and the top marginal income tax rates for US states for the years 2010 through 2019.Using state and year fixed effects and other relevant controls, I ran an ordinary least squares regression to test whether the top marginal tax rate affects state-to-state migration. My results show that for every one percentage point increase in the top marginal tax rate, a state should expect to lose approximately 5,687residents. In addition to the political implications, these results also suggest a state could encourage an influx of residents and increase tax revenues by decreasing income tax rates.