TY  - JOUR
AU  - Bakija,Jon
AU  - Slemrod,Joel
TI  - Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10645
PY  - 2004
Y2  - July 2004
UR  - http://www.nber.org/papers/w10645
L1  - http://www.nber.org/papers/w10645.pdf
N1  - Author contact info:
Jon M. Bakija
Department of Economics
Williams College
24 Hopkins Hall Dr.
Williamstown, MA 01267
Tel: 413/597-2325
Fax: 413/597-4045
E-Mail: jbakija@williams.edu

Joel Slemrod
University of Michigan Business School
701 Tappan Street
Room R5396
Ann Arbor, MI  48109-1234
Tel: 734/936-3914
Fax: 734-615-4323
E-Mail: jslemrod@umich.edu
AB  - This paper examines how changes in state tax policy affect the number of federal estate tax returns filed in each state, utilizing data on federal estate tax return filings by state and wealth class for 18 years between 1965 and 1998. Controlling for state- and wealth-class specific fixed effects, we find that high state inheritance and estate taxes and sales taxes have statistically significant, but modest, negative impacts on the number of federal estate tax returns filed in a state. High personal income tax and property tax burdens are also found to have negative effects, but these results are somewhat sensitive to alternative specifications. This evidence is consistent with the notion that wealthy elderly people change their real (or reported) state of residence to avoid high state taxes, although it could partly reflect other modes of tax avoidance as well. We discuss the implications for the debate over whether individual states should  decouple' their estate taxes from federal law, which would retain the state tax even as the federal credit for such taxes is eliminated. Our results suggest that migration and other observationally equivalent avoidance activities in response to such a tax would cause revenue losses and deadweight losses, but that these would not be large relative to the revenue raised by the tax.
ER  -