Internal migration and the effective price of state and local taxes

Austin J. Drukker ()
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Austin J. Drukker: Federal Trade Commission

International Tax and Public Finance, 2025, vol. 32, issue 1, No 5, 163-194

Abstract: Abstract This paper examines the mobility response of high-income households in the United States to a provision in a 2017 tax law that limited the federal deductibility of state and local taxes. The increase in the effective price of state and local taxes induced by the cap on deductibility caused high-income households to leave high-tax states in favor of low-tax states and to prefer low-tax states to high-tax states conditional on moving. The findings suggest that policymakers should take seriously the prospect that high-income taxpayers may flee states that tax them heavily, which could have long-lasting implications for states’ fiscal positions.

Keywords: State and local taxes; Deductibility; Tax price; Migration; Tax Cuts and Jobs Act (search for similar items in EconPapers)
JEL-codes: H24 H31 H71 H73 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:32:y:2025:i:1:d:10.1007_s10797-024-09828-x

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DOI: 10.1007/s10797-024-09828-x

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