Behavioral Responses to State Income Taxation of High Earners: Evidence from California

Joshua Rauh and Ryan J. Shyu

No 26349, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using administrative income tax data, we analyze the response to Proposition 30, a 2012 ballot measure that increased California marginal tax rates by up to 3 percentage points for high-income households. Relative to baseline rates of departure for their income levels, an additional 0.8% of the residential tax base that landed in the top bracket left California in 2013. Using matched out-of-state taxpayers as controls reveals an income elasticity with respect to the marginal net-of-tax rate of 2.5-3.2 for high-earners who stayed. These responses together eroded 45.2% of state windfall tax revenues within the first year and 60.9% within two years, with the extensive margin accounting for 9.5% of this total.

JEL-codes: H24 H31 H71 H73 J22 J61 R23 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-lma, nep-mig, nep-pbe and nep-ure
Note: PE
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Citations: View citations in EconPapers (4)

Published as Joshua Rauh & Ryan Shyu, 2024. "Behavioral Responses to State Income Taxation of High Earners: Evidence from California," American Economic Journal: Economic Policy, vol 16(1), pages 34-86.

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