en

IEB

Universitat de Barcelona logotipo
Working Paper
Fiscal Federalism
David R. Agrawal, Dirk Foremny

2018/06: 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. Conditional on moving, taxes have a significant effect on 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 1.7 percentage points. Focusing on the stock of top-taxpayers, we estimate an elasticity of the number of top taxpayers with respect to net-of-tax rates of 0.85. Using this elasticity, a theoretical model implies that the mechanical increase in tax revenue due to higher tax rates is larger than the loss in tax revenue from the out-flow of migration.



Download PDF

This website uses cookies to ensure that you receive the best experience when navigating. If you continue without changing the settings, you accept its use in conformity with our cookies policy. More information