State Taxation of Nonresident Income and the Location of Work

David Agrawal and Kenneth Tester

American Economic Journal: Economic Policy, 2024, vol. 16, issue 1, 447-81

Abstract: Prior studies show that taxes matter for the residential locations of high-income earners. But states raise a significant share of revenue from nonresidents. Using variation in state tax rates, we provide causal evidence on the effect of the net-of-tax rate on the location of labor supply for professional golfers. State taxes induce high-income earners to shift employment to low-tax states without a residence change. The elasticity of working in a state is 0.34 and, consistent with the superstar phenomenon, increases with earnings. Our results suggest a novel margin of mobility responses for top earners: the spatial relocation of labor supply by nonresidents.

JEL-codes: H71 H73 J22 J44 J61 R23 Z22 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: State Taxation of Nonresident Income and the Location of Work (2023)
Working Paper: State Taxation of Nonresident Income and the Location of Work (2023)
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DOI: 10.1257/pol.20210567

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