What motivates top scientists to relocate?
A recent National Bureau of Economic Research paper by Enrico Moretti and Daniel Wilson reports that the marginal tax rate on high-income people is a factor.
Similarly, the authors find that state corporate income taxes occupy the minds of scientists when choosing a place to live.
Moretti and Wilson find that a state tax increase that leads to a one-percent decline in after-tax income leads to a 1.7-percent increase in outward migration by top scientists to other states.
This effect is seen occurring gradually over many years following a tax rate change.
The authors find a similar effect for changes in state corporate taxes between states. More private-sector top scientists move to states reducing corporate taxes.
When migration patterns between states were looked at for top scientists who worked for academic institutions or the government, corporate taxes were not found to have an effect.
This makes sense since universities and government organizations do not pay the corporate tax.
If top scientists consider state tax rates when picking a place to move, other top earners surely do, too.
There is, after all, nothing peculiar about scientists. They care just as much as other high income earners about keeping the fruits of their own labor. Ironically, when top earners leave for a more business-friendly environment, the people of more modest means left behind can suffer negative consequences.
For an illustration of how this happens, see John Tamny’s new book that details how high top marginal tax rates drove the Rolling Stones to move from England to France in the 1970s to the detriment of many English “sound engineers, backup instrumentalists and singers, gofers and personal assistants, catering companies, drivers, public relations specialists, and many others.”
Some state governments recognize the allure of lower tax rates on top innovators.
That is why television ads paid for by the state of Texas have run in California, Illinois, and New York announcing that “Texas rewards success with no state income tax,” and Wisconsin has run ads in Illinois and Minnesota with the slogan “escape to Wisconsin.”
Based on Moretti’s and Wilson’s research, such ad campaigns have a high likelihood of success.
This piece originally appeared in The Daily Signal