The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from US States
American Economic Journal: Economic Policy
vol. 16,
no. 1, February 2024
(pp. 359-93)
Abstract
We evaluate how fiscal capacity and migration respond to the introduction of the individual income tax, drawing on new panel data on US states from 1900 to 2010. We find that the introduction of the income tax increased revenue per capita by 12 percent in the short term, 15 percent in the medium term, and 17 percent in the long term. The absolute level of revenue, however, did not significantly change over the long term for post–World War II adopters. To explain this, we show that the introduction of the income tax induced significant outmigration to non-income-tax states by middle- and high-earning households.Citation
Cassidy, Traviss, Mark Dincecco, and Ugo Antonio Troiano. 2024. "The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from US States." American Economic Journal: Economic Policy, 16 (1): 359-93. DOI: 10.1257/pol.20210388Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- N32 Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: U.S.; Canada: 1913-
- N42 Economic History: Government, War, Law, International Relations, and Regulation: U.S.; Canada: 1913-
- N92 Regional and Urban History: U.S.; Canada: 1913-
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
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