The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from US States

Traviss Cassidy, Mark Dincecco and Ugo antonio Troiano

American Economic Journal: Economic Policy, 2024, vol. 16, issue 1, 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.

JEL-codes: H71 H73 N32 N42 N92 R23 (search for similar items in EconPapers)
Date: 2024
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Working Paper: The introduction of the income tax, fiscal capacity, and migration: evidence from U.S. States (2022)
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DOI: 10.1257/pol.20210388

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