Behavioral responses to State income taxation of high earners evidence from California Joshua Rauh and Ryan Shyu
By: Rauh, Joshua
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Contributor(s): Shyu, Ryan.
Material type: 
ArticleSubject(s): RENTAS ALTAS | IMPUESTOS | POLITICA FISCAL | ELASTICIDAD IMPOSITIVA | CALIFORNIA | ESTADOS UNIDOS
In:
American Economic Journal : Economic Policy v. 16, n. 1, February 2024, p. 34-86Summary: Using administrative data, we analyze the response to Proposition 30, a 2012 measure that increased California marginal tax rates by up to 3 percentage points for high-income households. Relative to baseline departure rates, an additional 0.8 percent 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 eroded 45.2 percent of state windfall tax revenues within the first year and 60.9 percent within 2 years, driven largely by the intensive margin.
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| OP 2135/2023/4-1 Public pension reforms and retirement decisions | OP 2135/2023/4-2 Do tax incentives increase firm innovation? | OP 2135/2024/1 American Economic Journal : Economic Policy | OP 2135/2024/1-1 Behavioral responses to State income taxation of high earners | OP 2135/2024/1-2 Labor supply responses to income taxation among older couples | OP 2135/2024/1-3 Increasing the retirement age | OP 2135/2024/1-4 The introduction of the income tax, fiscal capacity, and migration |
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Using administrative data, we analyze the response to Proposition 30, a 2012 measure that increased California marginal tax rates by up to 3 percentage points for high-income households. Relative to baseline departure rates, an additional 0.8 percent 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 eroded 45.2 percent of state windfall tax revenues within the first year and 60.9 percent within 2 years, driven largely by the intensive margin.
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