Research shows direct link between state income taxes and migration – Taxpayer Protection and Government Accountability Act

Research shows direct link between state income taxes and migration

After the introduction of the income tax in the United States, there has been a migration of higher income earners toward states with lower or no income tax, a new study reveals.

This first-ever systematic analysis of 110 years of state income tax implementation throughout the United States also highlights the consequences of taxpayers fleeing to low or no-tax states. Published in the American Economic Journal: Economic Policy, the study is titled “The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from U.S. States” and was coauthored by Ugo Antonio Troiano, economist and associate professor at the University of California, Riverside. The analysis looks at pre-World War II and post-World War II personal income tax impacts. 

The state-level tax policies from 1900 to 2010 examined in the paper reveal that income tax adopting states increased revenue per capita by 12% to 17%, but that increase does not correspond to an increase in total revenues for the government in monetary terms. This is because the introduction of income tax in the post-World War II era led to out-migration by wealthy Americans. 

“Personal income tax means a tax upon labor income, first introduced for the purpose of redistribution of wealth,” said Troiano, whose expertise includes politics and economics. “The idea was to provide services to poorer parts of the population and reduce inequality between low-income and high-income residents.” 

According to study results, implementing higher taxes was not well accepted by many wealthy Americans — their higher income allows them to be more mobile, and therefore able to seek new residency in states with lower personal income tax or no tax. 

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