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State Tax Differentials, Cross-Border Commuting, and Commuting Times in Multi-State Metropolitan Areas

David Agrawal () and William Hoyt ()

No 4852, CESifo Working Paper Series from CESifo Group Munich

Abstract: We examine the effects of differences in income tax rates on commuting times within multi-state MSAs. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commute times and interstate commutes. Empirically examining multi-state MSAs allows us to exploit tax policy discontinuities while holding fixed other characteristics. We identify large effects on commuting times for affluent households and homeowners in MSAs in which taxes are based on the state of residence. We discuss how the model and empirical design can be used to study other policy differences.

Keywords: tax differentials; transportation; inter-jurisdictional competition; commuting (search for similar items in EconPapers)
JEL-codes: H20 H71 H73 R12 R28 R41 (search for similar items in EconPapers)
Date: 2014
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