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The introduction of the income tax, fiscal capacity, and migration: evidence from U.S. States

Traviss Cassidy, Mark Dincecco and Ugo antonio Troiano ()

MPRA Paper from University Library of Munich, Germany

Abstract: We evaluate how fiscal capacity and migration respond to the introduction of the individual income tax, drawing on new panel data on U.S. states from 1900 to 2010. We find that states that introduced the income tax experienced a 12 percent increase in total revenue per capita in the near term, a 15 percent increase in the medium term, and a 17 percent increase in the long term. However, the introduction of the income tax did not significantly change the absolute level of revenue over the long term, at least for post-World War II adopters. To explain this difference in the per capita and absolute results, we show that the introduction of the income tax induced significant outmigration to non-income tax states by middle- and high-earning households.

Keywords: state capacity; institutional change; fiscal reform; taxation; migration; USA (search for similar items in EconPapers)
JEL-codes: D78 H11 H41 H71 N42 (search for similar items in EconPapers)
Date: 2017, Revised 2022
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Journal Article: The Introduction of the Income Tax, Fiscal Capacity, and Migration: Evidence from US States (2024) Downloads
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